Donald Trump's stunning victory for the White House may mark the long-awaited end to the more than 30-year-old bull run in bonds, as bets on faster U.S. growth and inflation lead investors to favor stocks over bonds.
A two-day thumping wiped out more than $1 trillion across global bond markets worldwide, the worst rout in nearly 1-1/2 years, on bets that plans under a Trump administration would boost business investments and spending while firing up inflation.
"We've had a sentiment shift in the bond market. We've seen it, too. People have already started reallocating out of bonds and into stocks," said Jeffrey Gundlach, chief executive officer of Los Angeles-based DoubleLine Capital, which has more than $106 billion in assets.
"The cracks have been forming for five years - we're in this slow-grinding higher phase in yields," he said.
The stampede from bonds propelled longer-dated U.S. yields to their highest levels since January with the 30-year yield posting its biggest weekly increase since January 2009, Reuters data showed.
In the stock market, the blue chip Dow Jones industrial average finished out its best week in five years on Friday as it marked a record high close.
The 10-year German Bund yield rose to its highest level in eight months, while the 10-year British gilt yield climbed to its highest level prior to Britain's decision to leave the European Union on June 23, known as Brexit.
Bank of America Merrill Lynch's Global Broad Market Index fell 1.18 percent this week, the steepest percentage drop since June 2015, which is equivalent to more than $1 trillion. Its U.S. Treasury index suffered a 1.91 percent decline on a total return basis, the biggest weekly drop since June 2009.
Many investors, who have loaded up on bonds on the belief of protracted easy monetary polices worldwide due to sluggish global economy, are not ready to throw in the towel.
They are counting on insurers and pension plans, together with European and Japanese investors who are struggling with negative yields at home, to preserve the bull run for bonds.
"Are we going to see a dramatic backup in yields? It's too soon to make a conclusion about that," said Mihir Worah, chief investment officer in asset allocation and real assets at PIMCO in Newport Beach, California, which manages $1.55 trillion in assets.
Goldman Sachs and BAML forecast the 10-year U.S. yield could climb to 2.50 percent, compared with 2.11 percent at Thursday's close. The U.S. bond market was closed on Friday for Veterans Day.