U.S. Treasury yields increased on Wednesday after the early vote indicated that Democrats were on their way to winning both Senate seats in Georgia and therefore congressional control, a result that would give the Biden government more space. to promulgate your political agenda.
What are Treasures doing?
The yield of the 10-year Treasury note TMUBMUSD10Y,
was up 1.041% in March, 8.6 basis points more than the previous day. The 2-year banknote rate TMUBMUSD02Y,
honed 2.2 basis points to 0.143%, while the yield on the 30-year title TMUBMUSD30Y,
rose 11.4 basis points to 1.819%, more than an eight-month high.
What is driving the Treasurys?
The results of the preliminary vote show that Raphael Warnock won one of the two second Senate rounds in Georgia on Wednesday morning, according to the Associated Press, taking Democrats to a seat closer to the majority in the Senate.
Also with 98% of the expected total votes reported, Democratic challenger Jon Ossoff was ahead of Republican Senator David Perdue by just 0.4 percentage points.
With Senate control in view, Democratic lawmakers may now have more space to pass more aggressive fiscal measures that can weigh on the bond market through increased debt issuance and higher inflation expectations, according to analysts.
In fact, the 10-year note broke the key 1% level that contained the reference salary since March.
Read: The US bond market may face the risk of a ‘tantrum crisis’ after the second round of the Georgia Senate, says Jefferies
Treasury liquidation declined later in the session, however, after violent pro-Trump protesters stormed the U.S. Capitol building, forcing the suspension of a joint session of Congress to certify Joe Biden’s presidential victory.
In US economic data, Automatic Data Processing Inc. reported that employment in the private sector fell 123,000 in December, the first drop in 8 months, after an increase of 304,000 the previous month. Factory orders increased 1% in November.
The Federal Reserve’s minutes of its December policy meeting showed that only a small portion of its 17 interest-rate committee members were in favor of expanding long-term Treasury bond purchases last month.
What did market participants say?
The expected “increase in spending translates into more back-end supply and higher inflation, hence the steepest curve,” said Kevin Walter, co-director of Treasury trades at Barclays.