U.S. Treasury yields jumped on Wednesday after early voting indicated Democrats were on track to win both Senate seats in Georgia and thus control Congress, a result that would give the Biden administration more room to adopt its political agenda.
What do treasures do?
The 10-year Treasury note generates TMUBMUSD10Y,
stood at a high of 1.041% in March, 8.6 basis points higher than the previous day. The two-year grade rate TMUBMUSD02Y,
rose 2.2 basis points to 0.143%, while the 30-year bond yielded TMUBMUSD30Y,
rose 11.4 basis points to 1.819%, with a high of more than eight months.
What is driving Treasurys?
Preliminary voting results show that Raphael Warnock won one of the two Senate qualifiers in Georgia early Wednesday, according to the Associated Press, which brought Democrats closer to seats in the Senate majority.
Also with 98% of the total vote expected, challenger Democrat Jon Ossoff led Republican Sen. David Perdue with just 0.4 percentage points.
With Senate control in sight, Democratic lawmakers can now have more leeway to take more aggressive fiscal measures that can influence the bond market by increasing debt issuance and higher inflation expectations, according to the analysts.
In fact, the ten-year note opened the key 1% level that contains the benchmark maturity since March.
Read: US bond market could face risk of “rage” after Georgia Senate runoff, Jefferies
The liquidation of the Treasury slowed later in the session, however, after violent pro-Trump protesters stormed the U.S. Capitol building, forcing the halt of a joint session of Congress to certify the presidential victory of Joe Biden.
In US economic data, Automatic Data Processing Inc. said private sector employment fell 123,000 in December, the first decline in 8 months, after rising 304,000 the previous month. Factory orders rose 1% in November.
The Federal Reserve’s minutes of the December policy meeting showed that only a small portion of its 17 members of the interest rate-setting committee were in favor of expanding long-term treasury purchases last month. past.
What did market participants say?
The expected “increased spending translates into higher supply and higher inflation, hence the stronger curve,” said Kevin Walter, co-head of treasury trading at Barclays.