The US Treasury yields hit three-month highs this Tuesday, as coverage before the November 5 presidential elections and expectations of a more cautious Federal Reserve curbed demand for public debt.
The change in trend towards Donald Trump’s most likely triumph has weighed on bondsas the Republican’s policies, including tariffs and restrictions on undocumented immigration, are expected to increase inflation.
Strong bond selling on Monday “was driven in part by price prediction markets that give higher odds of a Trump victory”said Gennadiy Goldberg, head of US rates strategy at TD Securities in New York.
The betting site Polymarket assessed on Tuesday that Trump has a 64% chance of winning the presidency, compared to Kamala Harris’ 36%.
“Tariffs and immigration crackdowns would be stagflation shocks,” Goldberg said, adding that “The inflationary impact will most likely be seen first because it feeds through the data much faster.”
The U.S. budget deficit is also expected to worsen under a Trump or Harris presidency, which could lead to increases in Treasury supply next year.
The 10-year bond yield rose 2.2 basis points to 4.204%, after reaching 4.222%, the highest level since July 26. The yield on two-year notes rose 1 basis point to 4.035%.
The yield curve between two-year and 10-year notes steepened slightly to 16.7 basis points.
The Treasury Department will sell $13 billion in 20-year bonds on Wednesday and $24 billion in five-year inflation-protected securities on Thursday.
Source: Ambito
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