Trump Victory Sends Treasury Yields Surging
A specialist trader works inside a post on the floor at the New York Stock Exchange on Oct. 23, 2024.
Brendan McDermid | Reuters
Following Donald Trump’s victory in the U.S. presidential election over Vice President Kamala Harris, Treasury yields surged on Wednesday, with the possibility of a Republican sweep in Congress also on the horizon.
The 10-year Treasury yield spiked 18 basis points to reach 4.47%, its highest level since July, as investors anticipated increased economic growth and fiscal spending under a Trump presidency.
Meanwhile, the 2-year Treasury yield rose by 8 basis points to 4.28%, hitting its highest level since July 31. The relationship between yields and prices is inverse.
NBC News projected Trump’s victory, fueled by wins in North Carolina, Wisconsin, Pennsylvania, and Georgia. The network also predicted that Republicans would regain majority control of the U.S. Senate in 2025, with the House still up for grabs, potentially leading to a Republican sweep.
Wall Street’s Response
Prior to the election, Wall Street anticipated a significant increase in bond yields in the event of a Trump victory, with the potential for a surge in a Republican sweep scenario. The expectation stemmed from the possibility of tax cuts and tariffs under Republican leadership, which could stimulate economic growth but also widen the fiscal deficit and spark inflation.
Finance professor Jeremy Siegel from the Wharton School of the University of Pennsylvania noted on CNBC’s “Squawk Box” that a Republican sweep could unsettle the bond market, driven by concerns over potential tax cuts proposed by Trump and subsequent rise in bond yields.
Neither Trump nor Harris prioritized fiscal discipline during the campaign, leading to concerns that investors may demand higher yields to hold Treasuries as the government issues more debt to fund increasing spending.
“Bonds are selling off across the yield curve massively as the Trump trade gets applied again,” said Byron Anderson, head of fixed income at Laffer Tengler Investments, indicating market expectations of a Trump victory and potential Republican sweep.
Economist Stephanie Roth of Wolfe Research predicted that yields could approach 4.5% in the event of a Trump win, following a 50 basis point surge in the benchmark 10-year Treasury yield in October.
Looking ahead, the Federal Reserve is expected to announce a quarter-point rate cut on Thursday.
— CNBC’s Alex Harring and Sarah Min contributed reporting.
