A professional trader works inside a column on the floor at the New York Stock Exchange on October 23, 2024.
Brendan McDiarmid | Reuters
Treasury yields rose on Wednesday as Donald Trump won the US presidential election over Vice President Kamala Harris, with a potential sweep for Republicans in Congress as well.
The 10-year Treasury yield jumped 16 basis points to trade at 4.45%, hitting its highest level since July as investors bet a Trump presidency will increase economic growth, along with fiscal spending.
The yield on two-year Treasuries rose more than 8 basis points to 4.289%, reaching its highest level since July 31. One basis point is equivalent to 0.01%. Yields and prices have an inverse relationship.
NBC News expected Trump to win the presidential elections, driven by his victories in the states of North Carolina, Wisconsin, Pennsylvania, and Georgia. NBC News also projected that Republicans would regain majority control in the US Senate in 2025. The House was still up for grabs, leaving open the possibility of a Republican sweep.
The general thinking on Wall Street before the election was that bond yields could see a spike if Trump wins, and could rise in a Republican sweep, as the party controls Congress and the White House. That's because Republicans may offer steep tax cuts and tariffs, steps that could stimulate economic growth, but could also widen the fiscal deficit and reignite inflation.
“If Republicans sweep the House, the Senate and the presidency, I expect the bond market to be volatile,” Jeremy Siegel, a finance professor at the University of Pennsylvania's Wharton School, said on CNBC's “Squawk Box” on Tuesday. “I expect they'll be concerned that Trump is going to do all those tax cuts, and I think bond yields are going to go up.”
Neither Trump nor Harris promised fiscal discipline during the campaign, raising concerns that investors will demand higher yields in exchange for holding Treasuries as the government is forced to issue more and more debt to finance its ballooning spending.
“Bonds are being sold off across the yield curve broadly as the Trump trade comes into play again,” wrote Byron Anderson, head of fixed income at Laffer Tengler Investments.
The yield is expected to approach 4.5% with a Trump win, according to Stephanie Roth, chief economist at Wolff Research.
The benchmark 10-year Treasury yield rose 50 basis points in October, marking the largest monthly increase since September 2022.
On Thursday, the Federal Reserve will make its next interest rate decision, and is widely expected to cut interest rates by a quarter of a percentage point.
— CNBC's Alex Haring and Sarah Main contributed reporting.
