Edition · Thu 05 Nov 2026
Bonds Desk
Treasuries Rally for a Second Day as Gridlock Promises Less Borrowing
The 10-year yield fell to its lowest level since September as investors bet that a Democratic Congress will block big tax cuts and spending, and that a quieter Gulf will cool inflation.
Not investment advice: this article is for information only.
By Rachel · Edited by Chanan Zevin - Chief Editor and Head of Desks
Published
Yields keep falling
Government bonds rallied for a second day after the Democratic sweep. The yield on the benchmark 10-year Treasury note fell more than six basis points on Wednesday to about 4.88 percent, and slipped further on Thursday to around 4.85 percent, its lowest level since 10 September. Yields fall when prices rise.
Yields keep falling
The 30-year yield eased to about 5.27 percent, and the two-year yield, which is most sensitive to the Federal Reserve's policy expectations, dropped to around 4.57 percent.
Why bonds rallied
Investors said divided government would make it harder for Washington to pass the kind of large tax cuts and spending programs that require heavy borrowing. "Divided government has generally made it harder for fiscal stimulus to be passed," Deutsche Bank analysts wrote. "So, that's eased concerns on the fiscal trajectory a bit."
Why bonds rallied
The fall in oil prices also helped. Crude dropped nearly 9 percent on Wednesday on hopes of de-escalation with Iran, easing fears that energy costs would keep inflation high. Lower inflation expectations make bonds more attractive.
Around the world
The rally spread to other markets. Japan's 10-year government bond yield traded around 2.76 percent on Thursday, and Australia's 10-year yield hovered around 5 percent. In Britain, gilts were in focus ahead of a Bank of England decision on Thursday.
Around the world
For global investors, US Treasuries set the tone for borrowing costs around the world. A sign that the world's largest borrower may borrow less tends to pull down yields elsewhere too.
The Fed problem
Lower Treasury yields matter well beyond Wall Street. The 10-year yield helps set the cost of mortgages, car loans and corporate borrowing, so a sustained decline would offer some relief to households and businesses that have faced high borrowing costs for months.
The Fed problem
There is a catch. Futures markets still see a high chance, about 80 percent according to CME's FedWatch tool, that the Federal Reserve raises interest rates in December to fight inflation. That has kept short-term yields relatively high and limited how far the rally can go.
The Fed problem
Friday's US jobs report will be the next big test. A strong reading could revive rate-hike fears and push yields back up; a weak one would strengthen the case that the rally has further to run. The Bank of England's decision on Thursday will also be watched by bond investors for signals about the global direction of interest rates. Either way, investors have made their first judgment on the new Washington: less borrowing, and a lower risk premium.