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What does the bond “bloodbath” mean for the economy?

The slump in global bond prices after the US elections and the accompanying rise in long-term interest rates will cause some pain both to existing bondholders and future borrowers. Nonetheless, context matters too. Yields are still very low by past standards, including in those countries (such as Italy) whose bonds have sold off particularly sharply. What’s more, even if yields rise further, their long-awaited “normalisation” may simply be a welcome side-effect of fading deflation fears and the boost that the end of austerity could provide to economic growth.

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