Yields on 10-year Treasury notes climbed to a four-month peak of 4.471%, from 4.279%, breaking last week’s top of 4.388%
U.S. stock futures and the dollar surged in Asia on Wednesday as investors wagered Republican Donald Trump could win the U.S. presidential election, though officially the race remained too close to call.
Trump took the early lead over Democrat Kamala Harris as solid Republican-leaning states reported first, but key battleground races, in the handful of states likely to decide the election, were unlikely to be called for some time yet.
Treasury yields soared to four-month highs as some betting sites heavily favoured Trump, while The New York Time’s swingometer projected an 89% possibility of him winning.
Analysts generally assume Trump’s plans for restricted immigration, tax cuts and sweeping tariffs if enacted would put more upward pressure on inflation and bond yields, than Harris’ centre-left policies.
Trump’s proposals would also tend to push up the dollar and potentially limit how far U.S. interest rates might ultimately be lowered.
Thus while markets were still confident the Fed will reduce interest rates by 25 bps on Thursday. Futures for next year dropped into the red with December down 9 points.
As the early results come in, even though none of them are that surprising, we are seeing Treasury yields increasing a little bit, the dollar firming, bitcoin higher; kind of a classic Trump trade, according to Brian Jacobsen, chief economist at Annex Wealth Management.
Yields on 10-year Treasury notes climbed to a four-month peak of 4.471%, from 4.279%, breaking last week’s top of 4.388%. Two-year yields jumped to 4.291%, from 4.189% late in New York.
If we look at the long end of the curve, that reflects the fact that both candidates are not exactly fiscal conservatives, they are both willing to use the fiscal printing press, said Arnim Holzer, global macro strategist at Easterly EAB Risk Solutions.
The biggest issue is if Trump or Harris are going to get full mandates, he said. If they do not get blue or red sweeps, it limits the fiscal damage, and that is the best outcome for bondholders.
