Treasury Yields Decline After Democrats Take Congress; Eurozone Yields Edge Up — Update

By Emese Bartha

Treasury yields fell Wednesday, following a Democratic sweep 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 frustrations with the economy.

European government-bond yields edged higher, erasing initial falls, as investors awaited data at 1000 GMT, which are expected to show rising eurozone inflation.

The two-year Treasury yield fell to a two-month low of 4.546% earlier in the session and last traded 0.8 basis points lower at 4.608%, according to Tradeweb. The 10-year Treasury yield fell 2.3 basis points to 4.927%.

"[A] divided government can support Treasurys by limiting further fiscal expansion," said Andrew Jackson, head of investments at Vontobel, in a note.

The 10-year German Bund yield rose 1.5 basis points to 3.326% ahead of flash estimate eurozone inflation data. Analysts in The Wall Street Journal's poll forecast headline annual inflation to rise to 3.9% from 3.8% in September.

Vontobel's Jackson said persistent U.S. deficits and heavy Treasury issuance could limit how far long-dated Treasury yields fall, even with a stronger congressional check on the administration.

"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.

SEB expects a shift in power in Congress to lead to a slightly more expansionary fiscal policy while closing the door to major spending pushes, Elisabet Kopelman, U.S. economist and Federal Reserve watcher at the Swedish bank, said in a note.

"This is not a bad thing for bond markets given that budget deficits are already on an unsustainable path but not enough for a sustainable improvement either," she said. "Neither party, including the president, currently seems to be focused on the budget deficit."

On Wednesday, investors await an announcement by the Treasury on the composition of quarterly issuance.

The U.S. Treasury is expected to make no changes in coupon auction issuance sizes for the November to January quarter but it will likely revise its forward guidance, paving the way for supply shifts next year, said Dhiraj Narula, U.S. rates strategist at HSBC, in a note.

Write to Emese Bartha at emese.bartha@wsj.com

(END) Dow Jones Newswires

November 04, 2026 04:52 ET (09:52 GMT)