Bond yields hit their highest level since August this week, as investors bet a Democratic blue wave could bring big spending and more debt.
Whoever wins the presidential election is likely to seek an infrastructure program next year, but if Democrats win the presidency and Congress, the program could be bigger and come faster. The pile of new debt from such a program is one of the issues the bond market has been grappling with this week, as former vice president Joe Biden has risen in the polls against President Donald Trump. Treasury yields were at a 4-month high, and the 10-year yield rose to as high as 0.78%, breaking a range it had been in for weeks. Separately, the market has been expecting a stimulus package of $1.5 trillion or more aimed at helping businesses, the unemployed and state and local governments, hurt by the coronavirus and economic shutdowns. But Trump raised doubts about that fiscal package when he said talks with Democrats are off until after the election. The administration had offered a package of $1.6 trillion, but House Speaker Nancy Pelosi has been seeking $2.2 trillion. The stock market gave up its gains and turned negative after the news Tuesday afternoon. Bond yields slipped slightly with the 10-year Treasury at 0.74%. Yields move opposite price. „I think the reality is, even though there’s a pretty big knee jerk reaction here, this just delays it,“ said Jon Hill, senior fixed income strategist at BMP. „There is another program coming. It’s just now clear it will not occur until after the election.
