Bond Report: Treasury yields inch higher on fiscal relief hopes, Biden election odds

U.S. Treasury yields rose on Monday as investors eyed negotiations over a coronavirus aid relief package and the growing odds of a Democratic sweep in the November presidential election. Read More...

U.S. Treasury yields rose on Monday as investors eyed negotiations over a coronavirus aid relief package and the growing odds of a Democratic sweep in the November presidential election.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 0.769% rose 1.7 basis points to 0.760%, while the 2-year note rate TMUBMUSD02Y, 0.161% was up 0.2 basis point to 0.145%. The 30-year bond yield TMUBMUSD30Y, 1.556% picked up 1.9 basis points to 1.547%. Bond prices move inversely to yields.

What’s driving Treasurys?

On the outlook for fiscal stimulus, House Speaker Nancy Pelosi said Tuesday was the deadline for any deal before the Nov. 3 presidential election. Analysts cited hopes for a new coronavirus aid relief package for the inflows into haven assets.

But there remained doubt over what the path to a viable stimulus bill might look like, with both Democrats and Republicans both remaining far apart on the size of an eventual package.

Some also suggested the bond market was reacting more to polls showing Democratic candidate Joe Biden’s rising lead over President Donald Trump. The concern is a wide margin of victory for Biden could usher in more government spending and a flood of new debt issuance that could stoke inflationary pressures, pushing yields higher.

See: Here’s why the prospect of a Democratic clean sweep in November’s elections is rattling a sleepy U.S. bond market

China’s gross domestic product expanded by 4.9% in the third quarter from a year earlier. Though, the numbers fell short of analysts’ predictions, China’s rebound is outpacing many major economies that are still contending with the specter of COVID-19.

Investors hope China’s recovery could help drive global economic growth in the difficult months ahead.

What did market participants’ say?

“ With a little more than two weeks left until Election Day, the markets are either not paying attention or have resigned themselves to an outcome that could change history. I am not sure that the idea of a potential ‘blue wave’ has fully resonated with investors right now,” said Kevin Giddis, chief fixed-income strategist at Raymond James.

“If the Democrats win the White House and Congress, then there is a high likelihood that things will change for investors and companies that may be more costly than the market is expecting,” said Giddis.