US bonds’ midterm election rally skids to halt after strong jobs data
Treasury market’s tolerance for the robust jobs report suggests it is ‘applying a new lens’ to economic data after the election
The US Treasury market initially embraced strong October employment data, causing a sharp rise in bond prices and a decline in yields. However, this rally has since stalled after the November 3 midterm elections, which saw the Democratic Party seize control of Congress. As markets stabilized, the bond market's initial enthusiasm for the jobs report waned, leaving weekly gains mostly intact.
Only short-term yields, more sensitive to the Federal Reserve's rate expectations, remained elevated, reflecting a slightly higher probability of a December rate hike. The Democratic sweep of Congress has raised concerns about the sustainability of capital spending on artificial intelligence infrastructure, prompting investors to flock to bonds.
Despite this, the strong employment data reaffirms the economic strength highlighted by the Federal Reserve, all but guaranteeing a December interest rate increase.
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