US Treasury Yields Fall, Dollar Weakens as Democrats Lead in Early Midterm Count

US Treasury prices rose and the dollar weakened as Democrats took an early lead in the US midterm vote count.

Bloomberg reported on Nov. 3 that US Treasury yields broadly declined ahead of additional midterm election results and the Treasury Department’s quarterly borrowing plan. The five-year yield fell 7 basis points to 4.69%, while the 10-year yield dropped 6 basis points to 4.90%. A gauge of the dollar slipped 0.2%.

Markets are focused on the possibility that a Democratic majority in the House could constrain the Trump administration’s fiscal expansion agenda. With US national debt at about $40 trillion, divided control in Congress could reduce the chances of additional tax cuts or expanded fiscal spending, easing pressure for further Treasury issuance.

Andrew Ticehurst, a senior rates strategist at Nomura, said early election returns and prediction markets were increasing the odds of a Democratic sweep of both chambers. Such an outcome is typically negative for the dollar and positive for Treasuries.

On prediction market Kalshi, the odds of Democrats taking the House were priced at about 97%, while the chances of winning the Senate stood at about 86%. Markets are therefore also weighing the possibility that Democrats could secure control of both chambers.

Nathan Tuft, a senior portfolio manager at Manulife Investment Management, said deeper political gridlock in Congress could damp fiscal stimulus effects and put downward pressure on both Treasury yields and the dollar. Brij Khurana, a portfolio manager at Wellington Management, also said divided government has historically been broadly supportive of the US Treasury market.

The Treasury market is also watching the US Treasury Department’s quarterly borrowing plan. On Wall Street, some expect the department to make its biggest adjustment to issuance guidance since early 2024. In particular, market participants are discussing a plan to reduce long-term debt issuance from 2027 while increasing sales of Treasury bills and other short-dated securities.

Treasury yields rose the previous day after stronger-than-expected job openings data revived the prospect of additional Federal Reserve rate increases. Investors are now looking to the borrowing plan and Friday’s US employment report for clues on the path of interest rates.