US 10-year Treasury yield falls after Democrats' midterm win, jobs data in focus
US Treasury yields fell across most maturities on Thursday as investors assessed the outcome of the US midterm elections and awaited fresh employment data. The yield on the benchmark 10-year US Treasury note fell by around 3 basis points to 4.865% at 4:11 am ET on Thursday.
The 30-year Treasury yield also declined by 3 basis points to 5.245%, while the 2-year Treasury yield remained almost unchanged at 4.581%.
A basis point is equal to 0.01 percentage point, or one-hundredth of 1%. Treasury yields and bond prices move in opposite directions. This means bond prices rise when yields fall and decline when yields increase, according to CNBC.
US midterm election results
The latest movement came as investors continued to assess the US midterm election results, in which Democrats won control of Congress. The Democratic victory, described as a ‘blue wave’, has raised questions about the direction of US government policies during the remaining years of President Donald Trump’s term.
Also read: US midterms could fuel AI trade as data centre curbs favour Microsoft, Amazon
10-year Treasury yield falls
Investors are assessing how the Democrats’ control of Congress could affect Trump’s policy plans and the government’s decisions on major issues, including foreign policy. Treasury yields had already fallen sharply after the election results. The 10-year Treasury yield ended Wednesday’s trading session 6 basis points lower.
Oil prices also fell on Thursday for the fourth consecutive day. Investors expect a lower possibility of further escalation in the Iran war following the midterm election results. The fall in oil prices is also important for bond markets because higher energy prices have been putting pressure on government bonds around the world this year.
Oil prices and inflation concerns
Rising oil prices have increased concerns about global inflation because supply disruptions in the Middle East could make energy more expensive. Higher energy costs can push up prices across the economy.
These inflation concerns have also raised fears that central banks could take a more aggressive approach to interest rates to control rising prices. Such a move could put further pressure on government bonds.
Also read: US stocks surge as oil plunges below $100 on Iran war hopes after Democrats’ win
US jobs data in focus
Investors are now waiting for the latest US weekly jobless claims data, which is scheduled to be released at 8:30 am ET on Thursday. The report will provide fresh information about the number of people filing for unemployment benefits, according to CNBC.
Markets are also looking ahead to the October US nonfarm payrolls report, which is scheduled for release on Friday. The report will provide a broader picture of hiring and employment conditions in the US economy.
Investors will watch the employment figures for further signs of the strength of the US labour market. The data could influence expectations about the US economy and the Federal Reserve’s future interest rate decisions.