Treasury Yields Decline After Democrat Triumph; Eurozone Bond Yields Trade Mixed -- 2nd 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 frustration over the economy.

"Importantly, we see this result as mostly a rejection of Trump's policies rather than a vote in favor of progressive policies," said Subitha Subramaniam, chief economist at Sarasin & Partners, in a note.

The two-year Treasury yield--which fell to a two-month low of 4.546% earlier in the session--was recently down 1 basis point to 4.603%, according to Tradeweb. The 10-year Treasury yield fell 3.5 basis points to 4.914%.

Eurozone 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%.

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

The Democrats' victory in the U.S. midterms doesn't mean that the party will be able to implement its program, Nabil Milali of Edmond de Rothschild Asset Management said in a note. The President retains a veto, which is likely to block any legislation with which he disagrees, the portfolio manager said.

While President Trump has indicated his willingness to collaborate with the Democrats, "the political reality and the pressure his party is bound to exert should dissuade him from granting any major victories to his political opponents ahead of the 2028 presidential election," Milali said.

Investors await an announcement Wednesday 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, Dhiraj Narula, U.S. rates strategist at HSBC, wrote in a note.

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

(END) Dow Jones Newswires

November 04, 2026 07:31 ET (12:31 GMT)