Long-term US Treasury yields fall to eight-week low as bond market is boosted by midterm election expectations

According to the Wall Street Journal, on Thursday, as investors believed that the Democratic Party’s comprehensive victory in the U.S. midterm elections could lead to tighter fiscal discipline and benefit the bond market, long-term U.S. Treasury yields fell to an eight-week low. According to Tradeweb data, yields on U.S. Treasuries across all maturities declined. Specifically, the yields on 10-year and 30-year U.S. Treasuries reached intraday eight-week lows of 4.837% and 5.229% respectively, before rebounding slightly, but still ended the day lower. The two-year U.S. Treasury yield, after dropping to a two-month low on Wednesday, last traded just above that low. Shari Hensrud, Chief Investment Officer at MissionSquare, stated that a divided Congress may benefit the bond market, but it does not solve the problem of the fiscal deficit. The decline in fiscal risk may support long-term U.S. Treasuries and exert some downward pressure on long-term yields; meanwhile, short-term U.S. Treasury yields remain more influenced by Federal Reserve policy, inflation, and labor market conditions.