U.S. Treasuries rise amid midterm elections as markets expect government spending to be constrained
On Wednesday, November 4, U.S. Treasuries rose. With Democrats expected to control Congress, investors anticipated political gridlock in Washington that could limit government spending. Meanwhile, regulation of artificial intelligence could slow economic growth and reduce the need for the Federal Reserve to raise interest rates. One analyst said markets were also relieved that President Trump’s plan to give every American adult $5,000 might not come to fruition. In addition, falling stock prices prompted investors to shift into safe-haven assets such as Treasuries, providing support to the bond market. Trump had previously pledged to give every adult U.S. citizen $5,000 if Republicans successfully retained control of Congress. The plan would cost about $1.2 trillion, equivalent to 16% of the federal budget. Andrew Lilley, Barrenjoey’s chief interest-rate strategist, said: “Although the market had previously put the odds of this scenario occurring at just 5%, that risk has now disappeared. If it were implemented, the reaction in the Treasury market would be catastrophic.”
On Wednesday, November 4, U.S. Treasuries rose. With Democrats expected to control Congress, investors anticipated political gridlock in Washington that could limit government spending. Meanwhile, regulation of artificial intelligence could slow economic growth and reduce the need for the Federal Reserve to raise interest rates. One analyst said markets were also relieved that President Trump’s plan to give every American adult $5,000 might not come to fruition. In addition, falling stock prices prompted investors to shift into safe-haven assets such as Treasuries, providing support to the bond market. Trump had previously pledged to give every adult U.S. citizen $5,000 if Republicans successfully retained control of Congress. The plan would cost about $1.2 trillion, equivalent to 16% of the federal budget. Andrew Lilley, Barrenjoey’s chief interest-rate strategist, said: “Although the market had previously put the odds of this scenario occurring at just 5%, that risk has now disappeared. If it were implemented, the reaction in the Treasury market would be catastrophic.”