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U.S. Treasury yields rose early Tuesday, extending the previous day’s selloff as investors fled from bonds on expectations that a Democratic clean sweep in November’s elections was increasingly likely.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 0.784% rose 2.3 basis points to 0.785%. The 2-year note yield TMUBMUSD02Y, 0.129% was steady at 0.145%. The 30-year bond yield TMUBMUSD30Y, 1.598% climbed 3.3 basis points to 1.600%. Bond prices move in the opposite direction of yields.
What’s driving Treasurys?
More analysts are now citing the possibility of the Democratic Party achieving a majority in both the U.S. House and Senate, along with the presidency. Recent polls have shown a widening lead by former Vice President Joe Biden since the first presidential debate.
That could see a much larger fiscal stimulus package passed, easing worries that the U.S. economy will have to muddle along without further stimulus measures.
The U.S. Treasury Department will auction $52 billion of 3-year notes Tuesday afternoon, an increase of $2 billion from September’s auction.
In U.S. economic data Tuesday, the U.S. trade deficit widened to $67.1 billion in August. The Labor Department’s Job Openings and Labor Turnover Survey is due at 10 a.m. ET.
Federal Reserve Chairman Jerome Powell will also speak later at 10:40 a.m. ET. Cleveland Fed President Loretta Mester said on late Monday that the central bank could consider shifting its purchases towards more longer-dated debt.
What did market participants’ say
“Joe Biden’s poll lead has remained stable since the first debate last week, but the more salient point is that the threat of a contested result and legal limbo may be diminishing as voters turn in favor of the Democratic party candidate in swing states such as Florida and Pennsylvania,” said Kenneth Broux, an analyst at Societe Generale.
“Markets simply loathe uncertainty, and so the greater the likelihood of a decisive result can result in an adjustment of long volatility positions,” said Broux.
