A professional trader works on the trading floor of the New York Stock Exchange on October 23, 2024.
Brendan McDermid | Reuters
U.S. Treasury yields rose in early trading Tuesday evening as investors awaited the outcome of the tight presidential race between Vice President Kamala Harris and former President Donald Trump.
The 10-year Treasury yield rose 15 basis points to 4.44%, its highest level since July 2. %. There is a reciprocal relationship between output and price.
Although NBC News has not yet surveyed any of the major swing states, traders speculated that early returns would be good for the former president.
Bond yields could soar if Trump wins and the Republicans sweep Congress and the White House. That’s because Republicans are likely to enact tax cuts and higher tariffs that could widen fiscal deficits and reignite inflation.
“If the Republicans sweep the House, the Senate and the presidency, I expect there will be turmoil in the bond market,” Jeremy Siegel, a finance professor at the University of Pennsylvania’s Wharton School, told CNBC’s “Squawk Box” on Tuesday. I expect they will be worried about all these tax cuts Trump is going to enact, and I think bond yields will go up.”
Neither Trump nor Harris made a real commitment to fiscal discipline on the campaign trail, raising concerns that investors will demand more as the government is forced to issue more and more debt to fund its ballooning spending. Higher yields in exchange for holding U.S. Treasuries.
“Bonds are seeing a massive sell-off across the yield curve as the Trump trade is enacted again,” Byron Anderson, head of fixed income at Laffer Tengler Investments, wrote. “We see markets expecting a Trump win, And there’s a real possibility of a Republican sweep.”
Stephanie Roth, chief economist at Wolfe Research, said yields are expected to be closer to 4.5% if Trump wins and fall to 4% if Harris wins.
A Harris administration with a divided Congress could push bond yields back down.
“I think with a divided Congress, whoever wins the presidency is probably the market favorite, so neither candidate is able to advance their full agenda,” Siegel said.
The benchmark 10-year Treasury yield surged 50 basis points in October, the biggest monthly gain since September 2022.
On Thursday, the Federal Reserve will make its next interest rate decision, and is widely expected to cut interest rates by 25 basis points.
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