US election: Treasuries rates plunge in the face of uncertainty

Posted on Nov 4, 2020 at 10:25 a.m.

The markets hate uncertainty. With the result of the US election promising to be more uncertain, investors are preparing for a complicated period. On Monday morning, the 10-year rate on Treasuries, US government bonds, plunged 13 basis points to 0.67%. Its biggest daily drop in seven months, according to Bloomberg.

The brutality of this drop can be explained in part by the fact that investors were still betting the day before, on a blue wave in the United States. In this scenario, Joe Biden should largely win the presidential election, but also benefit from a comfortable majority in Congress which gives him leeway to push through his reforms. And in particular a big recovery plan which would widen the American deficit. This prospect had pushed the US 10-year yield above 0.90%. The yield on 30-year bonds fell 20 basis points to 1.54%.

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