The 10-year Treasury yield fell on Wednesday as investors weighed Democratic wins in the U.S. midterm elections and a pullback in oil prices. Traders at JPMorgan said reduced deficit spending is one of the issues Wall Street is focusing on.
The 10-year Treasury yield fell more than 5 basis points to 4.898% on Wednesday. The move followed big Democratic wins in the midterms and a drop in oil prices.
The 30-year yield declined more than 3 basis points to 5.293%, while the 2-year yield dropped more than 4 basis points to 4.573%. Yields and prices move inversely.
Democrats obtained majorities in both the House and Senate, flipping Senate seats from Republicans in Iowa, Kansas, North Carolina, Ohio, South Carolina, Maine and Texas. They also won gubernatorial races in Ohio and Texas.
However, the result could rein in government spending from the Trump administration, because it makes it harder for the White House to push legislation through Congress. Traders at JPMorgan said one of the issues Wall Street is focusing on is reduced deficit spending. They added that this could come from asserting power over the budget and likely wading through a government shutdown.
JoAnne Bianco of BondBloxx said a stronger Treasury market makes sense. According to Bianco: "a more divided policy environment should make deficit growth more difficult" and could improve the fiscal outlook.
Oil also dropped on Wednesday, with Vice President JD Vance blaming the Iran war for the Republican Party's election losses. West Texas Intermediate futures fell 8% to around $88 per barrel, and Brent futures declined 8% to roughly $94.
Bianco said attention will shift back to geopolitics and the health of the U.S. economy. She added that there appears to be no immediate move toward escalating tensions with Iran, which should help keep energy prices and inflation pressures contained.
Source: CNBC
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