Treasury Yields Down Following Democrats Midterm Win —3rd Update

By Emese Bartha and Paulo Trevisani

Treasury yields fell Wednesday following the Democratic party's overwhelming win in the U.S. midterm elections.

Voters delivered a rebuke to President Trump and his party, stripping Republicans of congressional control as Democrats won the House of Representatives and the Senate amid widespread frustration over the economy.

The two-year Treasury yield fell to a two-month low of 4.546%, after settling Tuesday at 4.612%, according to Tradeweb. The 10-year Treasury yield fell to 4.888% from 4.951%. Yields on the 30-year bond declined to 5.282% from 5.323% a day ago.

The decline in yields was accompanied by a sharp fall in oil prices. The Democratic win is seen as increasing the chances of an end to the Iran war. WTI slid 8% to $88 a barrel, on pace for its lowest settlement in a month.

Inflation expectations also eased substantially. Derivative markets were pricing inflation one year from now at around 2.1%, down from 2.4% Tuesday and 2.7% at the end of last week, according to LSEG.

Investors will be looking to the October consumer price index next week for indications of where prices are heading.

"We'll see higher inflation, but not accelerating more than we've seen in the last reading," said Peter Cardillo, chief market economist at Spartan Capital Securities.

Bond markets were also reassured by the U.S. Treasury's quarterly refunding plans, which kept auction sizes unchanged for two-year and longer maturities. Cardillo said that stability eases fears of oversupply and helped keep yields down.

On the data front, ADP reported that private-sector employers added a net 86,000 jobs in October, the same as in September and more than The Wall Street Journal consensus forecast of 75,000.

The Labor Department will release the broader nonfarm payrolls Friday and economists polled by the Journal expect an increase to 59,000 from September's 29,000.

Markets' main focus, however, was the stunning Democratic sweep and its potential implications for U.S. policy.

"[A] divided government can support Treasurys by limiting further fiscal expansion," Andrew Jackson, head of investments at Vontobel, said in a note. Persistent deficits and heavy Treasury issuance could limit how far long-dated Treasury yields fall, even with a stronger congressional check on the administration, Jackson said.

"Blocking new spending is not the same as reducing the existing deficit," he said.

Inflation and Federal Reserve policy are likely to matter more for bonds than the election results, while any renewed rise in energy prices could complicate the outlook, he added.

European government-bond yields were mixed, as flash estimate data showed consumer price inflation in the eurozone accelerating faster than expected, coming in at 4.0% in October, up from 3.8% in September, and above analysts' expectations of 3.9% in The Wall Street Journal's poll. The 10-year German Bund yield rose 0.3 basis point to 3.315%, while the 10-year French OAT yield declined 5.1 basis points to 4.877%.

Write to Emese Bartha at emese.bartha@wsj.com and to Paulo Trevisani at paulo.trevisani@wsj.com

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November 04, 2026 15:23 ET (20:23 GMT)