Treasury Yields Tick Lower Ahead of Midterm Elections

After a volatile October month for both stocks and bonds, the capital markets are readying themselves for what could be a potential post mid-term rally that is 18-for-18 thus far. Benchmark Treasury yields responded by ticking lower across the board.

The 10-year note went down to 3.189 and the 30-year note followed, heading lower to 3.422. The two-year note ticked down to 2.907, while the five-year note edged down to 3.019.

Political analysts are expecting a split Congress post-midterm election results, which would make the House more Democratic and the Senate Republican. However, market analysts are predicting that this political divide will do little in terms of impacting the capital markets.

“I look at history, and I say, what’s happened in the past when we’ve had a Republican president and the Democrats flipped all or a part of Congress,” said Jack Hough, associate editor at Barron’s. “I look at 2006, 1986 and the answers is, a whole lot of nothing. Positive, decent returns over the next year, not much motion on Election Day. I hate to tell people, I think we imagine a bigger connection than there is. One thing that the right and the left can both agree on is they hate me when I tell them that the stock market doesn’t care about your politics.”

Peter Boockvar, chief market analyst for the Bleakley Advisory Group, echoed this sentiment.

“Regardless of who takes the House, I don’t expect any legislation of substance in the next two years that would matter for markets and the economy. The administration got what it wanted in the tax bill. Maybe most relevant in the short term, the results could determine the negotiating stance of the Administration with China in the eyes of both Trump and Xi,” wrote Boockvar.