Stagflation "ghost" looms over the world! Trump's temporary delay in fighting cannot hide the panic. The global bond market briefly showed a disastrous situation in 2022.

Despite President Trump suddenly announcing a five-day postponement of the threat to destroy Iran's power plant, this move has pushed global stock and bond markets to rebound, with oil prices falling in response. However, the shadow of stagflation triggered by the Iran conflict has not been reversed, and this panic has led to the evaporation of over $2.5 trillion in global bond market value in March, with the possibility of recording the largest monthly decline in over three years. On the local time of the 23rd, US President Trump posted on the social media platform "True Social" that "the United States and Iran have had very good and productive conversations over the past two days." At the same time, he indicated that he had instructed to suspend all military strikes on Iran's power plants and energy infrastructure for a period of five days, provided that ongoing meetings and discussions are successful. As a result, on Monday, yields on various US Treasury bonds fell across the board, with the yield on the two-year US bond, which is most sensitive to changes in Federal Reserve policy, falling first. At the same time, traders completely abandoned their bets on the Federal Reserve tightening monetary policy this year, and instead re-priced some loosening expectations. Before Trump's statement, the currency market had already factored in the expectation of a 25 basis point rate hike. Global bonds have experienced a brutal market in 2022 However, since the end of February when the US launched military strikes against Iran, the soaring oil prices have accelerated inflation, continuously eroding the real value of fixed coupon bonds, leading to intense selling in the bond market. Although the scale of the bond market's contraction is not as large as the around $11.5 trillion losses in the global stock market, the steep decline is particularly unusual - during periods of geopolitical turmoil, bonds should be a safe haven for funds. "The market has begun to price in the imminent impact of stagflation," said Kathryn Rooney Vera, chief market strategist at StoneX Group Inc., in an interview. "The longer the conflict lasts, the higher oil prices may rise." Before Trump announced negotiations between the US and Iran, relevant indices showed that the total market value of global government bonds, corporate bonds, and securitized debt had fallen from nearly $77 trillion at the end of February to $74.4 trillion, a 3.1% decline for the month, potentially marking the largest drop since September 2022 - when the Federal Reserve was in an aggressive rate hike cycle. Government bonds have been the leading force in the decline: the Bloomberg Global Sovereign Bond Index fell 3.3% in March, while the Corporate Bond Index declined by 3.1%. Due to market expectations that the Federal Reserve will be forced to hike rates to combat inflation, US Treasury yields rose to multi-month highs at one point, with US bonds falling for the third consecutive week. Asian markets were also under pressure, with bond yields in India, Japan, and South Korea rising; the yield on Australian 10-year bonds hit a high not seen since 2011 on Monday, while New Zealand bond yields reached a new high since May 2024. The sell-off in the bond market accelerated on Monday, triggered by Trump's earlier threats: if Iran does not reopen the Strait of Hormuz, it will strike its power plant; Iran then retaliated, saying that if the US acts, it will "completely block" this key waterway. Last week, a rate strategist at BNP Paribas in Paris pointed out in a client report that if energy prices remain high and unemployment stabilizes, the Federal Reserve's policy meeting in April may release the possibility of rate hikes. Joachim Nagel, a member of the ECB Governing Council, also stated that if the Iran conflict further increases inflationary pressures, the ECB may need to consider rate hikes as soon as next month. Trinh Nguyen, senior economist at the French Foreign Trade Bank in Hong Kong, said, "High inflation pressures limit central banks' policy space, and some central banks will be forced to raise interest rates during economic downturns to curb inflation and prevent depreciation of their currencies."