Ten-Year Yield Spikes To Four-Month High On Trump Victory

(RTTNews) - Treasuries showed a substantial move to the downside during trading on Wednesday, more than offsetting the advance seen over the two previous sessions.

Bond prices moved sharply lower in early trading and remained firmly negative throughout the day. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, spiked 13.7 basis points to 4.426 percent.

With the substantial increase on the day, the ten-year yield surged to its highest closing level since early July.

The sell-off by treasuries came as former President Donald Trump was declared the winner in the presidential election versus Vice President Kamala Harris.

Claiming victory in several key swing states, Trump is projected to win far more than the 270 Electoral College votes needed to secure his return to the White House.

Trump's decisive victory reduced the safe-haven appeal of bonds, as it avoided the uncertainty that would be created by a prolonged vote counting process and potential legal challenges.

Treasuries also fell sharply as another Trump presidency is expected to be positive for the economy but also lead to increased budget deficits due to planned tax cuts.

Trump has also called for increased tariffs on China and other countries, which could lead to renewed inflation concerns.

"A side effect of tariffs and higher prices would be interest rates staying higher for longer, which would be unhelpful for the housing market which, in turn, will act as a drag on home-related categories," said Neil Saunders, Managing Director of GlobalData.

He added, "While Trump promised lower interest rates, and wants more control over the setting of rates, it is not in his immediate gift to enact this kind of change."

With the elections now largely in the rearview mirror, traders will turn their attention to the Federal Reserve, which is due to announce its latest monetary policy decision on Thursday.

The Fed is widely expected to lower interest rates by 25 basis points, but the accompanying statement could the impact the outlook for future rate cuts.

The central bank's monetary policy announcement is likely to be in the spotlight on Thursday, overshadowing reports on weekly jobless claims and third quarter labor productivity and costs.