The US 10-year Treasury yield inched up to 4.92% on Tuesday as investors positioned for potential short-term volatility around the US midterm elections. Initial results are expected after polls close, with markets watching closely to see whether Democrats can secure control of both chambers of Congress. A Democratic sweep remains possible but is far from assured. A divided government could offer some reassurance to bond investors by constraining further fiscal expansion, though it would do little to tackle the underlying budget deficit.
On the fiscal side, the US Treasury lowered its Q4 borrowing estimate by $10 billion to $618 billion, citing a higher-than-expected opening cash balance. However, stripping out this additional cash cushion, underlying borrowing needs are actually $24 billion higher than previously projected.
Elsewhere, oil prices extended Monday’s steep losses after President Donald Trump announced that Washington would end its $4 billion aid program to Israel by year-end.
