US yields advance as betting sites lean anew toward Trump election win
Higher fiscal deficit seen regardless of which candidate wins
US services index rises, help extend gains in Treasury yields
US yield curve steepens slightly
US Treasury to sell $42 billion in 10-year notes
By Gertrude Chavez-Dreyfuss
NEW YORK, Nov 5 (Reuters) -U.S. Treasury yields rose on Tuesday after posting sharp declines in the previous session, as online prediction markets have again started to favor Republican former President Donald Trump over Democratic nominee Vice President Kamala Harris for the nation's top job.
Millions of Americans are headed to the polls on Tuesday to decide who gets to be U.S. president in a contentious race whose outcome may not be determined for days. This could happen especially if the margins in battleground states are as narrow as expected.
Online betting sites such as PredictIt, Kalshi and Polymarket all show Trump ahead, although national polls remain too close to favor any candidate.
"Betting odds seem to favor a Trump win again. We had some consolidation over the weekend that sort of shifted the odds in the other direction, but that has since changed," said Tom di Galoma, managing director & head of fixed income trading, at Curvature Securities.
"On the margin though, no matter which candidate wins, you're going to see higher deficit spending. There are institutional accounts that want to be short rates/Treasuries as a result."
In late morning trading, the benchmark U.S. 10-year yield gained 4.7 basis points (bps) to 4.358% US10YT=RR.
On the short end of the curve, the U.S. two-year Treasury resumed its climb, rising 4.6 bps to 4.22% US2YT=RR.
U.S. yields further gained after U.S. services sector activity unexpectedly advanced in October to a more-than two-year high, while employment firmed. The Institute for Supply Management's (ISM) nonmanufacturing purchasing managers (PMI) index accelerated to 56.0 last month from 54.9 the prior month, the highest since August 2022.
In other maturities, U.S. 30-year yields rose 1.6 bps to 4.511% US30YT=RR.
The U.S. yield curve steepened slightly on Tuesday, with the gap between two-year and 10-year yields at 12.9 bps US2US10=TWEB, up from 12.1 bps late on Monday. The curve has been on a steepening trend for the last few months, a scenario that occurs when the Federal Reserve is cutting interest rates.
The Fed is once again expected to do so this week, reducing rates by 25 bps, at the end of a two-day policy meeting which ends on Thursday. But the Fed has not been the focus this week for bond investors, with all the attention on the U.S. presidential election.
Later on Tuesday, the U.S. Treasury will auction $42 billion in 10-year notes. It could well be that the selloff in Treasuries that pushed yields higher on Tuesday could be due to concession, in which investors sell Treasuries ahead of auctions to push up the yield before buying them back at a lower price.
Monday's U.S. three-year note sale saw soft demand, as it priced higher than expectations, with investors demanding a premium to buy the note. It's an outcome that was expected, however, due to election risks that forced investors to sit this one out. It could well happen to the 10-year note auction as well.
Reporting by Gertrude Chavez-Dreyfuss
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
