News

Long-term Treasurys sold off on Monday, sending corresponding yields up by the most in two weeks, as traders weighed the rising odds of a November victory for Republican presidential nominee Donald Trump following a weekend assassination attempt.

What happened

• The yield on the 2-year Treasury BX:TMUBMUSD02Y slipped less than 1 basis point to 4.453%, from 4.460% on Friday. Monday’s closing level was the lowest since Feb. 7.
• The yield on the 10-year Treasury BX:TMUBMUSD10Y rose 4.4 basis points to 4.231%, from 4.187% on Friday.
• The yield on the 30-year Treasury BX:TMUBMUSD30Y rose 5.6 basis points to 4.457%, from 4.401% on Friday.
• Ten- and 30-year yields each finished higher for the first time in four sessions. The increases seen in each yield on Monday were the biggest since July 1.

What drove markets

Investors were focused on how Saturday’s shooting at a Pennsylvania campaign rally will affect the presidential race between Trump and President Biden.

Long-term Treasury yields rose at a fast pace relative to shorter-term ones in what’s known as a steepening move, as polls showed Trump with an edge over Biden. Monday’s market moves were an extension of the “Trump trade” that played out after last month’s televised debate between the two candidates.

“Politics have returned to the forefront for financial markets following an assassination attempt on former President Trump over the weekend,” FHN Financial strategist Will Compernolle wrote in a note.

The Treasury curve has steepened “from the so-called `Trumpflation’ trade that reflects investors’ belief of a rising likelihood of Trump’s return to the White House that would come with wider deficits and higher long-term inflation,” the strategist said. “For now, though, the relatively modest magnitude of such bond-market moves suggests that traders feel better equipped to price in changes from the macroeconomic environment than the political landscape.”

Meanwhile, Federal Reserve Chairman Jerome Powell, speaking to the Economic Club of Washington, said he does not see a hard-landing scenario for the U.S. economy right now. He also refrained from signaling when any interest-rate cuts might begin.

Earlier on Monday, the New York Federal Reserve Bank’s Empire State factory gauge contracted for an eighth straight month, slipping to negative 6.6 in July.