U.S. Bond Yields Climb on Post-Election Outlook
By Julia-Ambra Verlaine
U.S. government yields climbed Friday, lifted toward monthly
gains by expectations that government spending will boom after the
The yield on the 10-year U.S. Treasury, a benchmark for
borrowing costs on everything from mortgages to student debt,
traded at a recent 0.853%, according to Tradeweb, up from 0.834% on
Yields, which rise as bond prices fall, have increased in recent
sessions, even as stocks have posted sharp declines. Some investors
said expectations that post-election stimulus will spur growth and
inflation, along with greater government borrowing, have outweighed
"Investors will demand higher rates to absorb the supply of debt
if the U.S. goes on a massive fiscal expansionary program," said
Michael de Pass, global head of U.S. Treasury trading at Citadel
Many now expect Democratic control of the White House and
Congress, which could result in greater spending to help businesses
and local governments weather the pandemic. The U.S. Treasury has
issued substantial amounts of bonds in recent years to fund
everything from tax cuts to pandemic relief efforts. Many expect
the Treasury will continue to raise auction sizes next month during
its quarterly refunding announcement.
Expectations that the Federal Reserve will hold interest rates
low for years to help boost the economy, along with the central
bank's bond purchases, have helped keep Treasurys trading in a
narrow range for months. A Democratic sweep could upend that range
and send longer-term yields back above 1%, many said.
"The general consensus is that a Democratic sweep will be
negative for Treasuries given the likelihood of considerable,
debt-financed stimulus, " said Russ Koesterich, a portfolio manager
at the BlackRock Global Allocation Fund.
Data on Friday pointed to growing strength in household spending
on goods and services, with the Commerce Department saying
personal-consumption expenditures posted a fifth straight monthly
Another reason analysts said bond prices have fallen alongside
stocks: Hedge funds are looking to rotate into cash, cutting
positions ahead of the U.S. election to avoid price swings. U.S.
stocks fell Friday with the Dow Jones Industrial Average on track
to close out its worst month since March. With less than a week to
go until the U.S. elections, increasing coronavirus infections
across the globe and looming shutdowns that could dampen the
economy, some investors said they are pressing the pause
"Clarity is just around the corner, but for now investors don't
want to do anything heroic," said Adam Crisafulli, founder of
market intelligence firm Vital Knowledge.
(END) Dow Jones Newswires
October 30, 2020 14:52 ET (18:52 GMT)
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