Long-term US Treasury yields hit eight-week lows after midterms

Long-term US Treasury yields fell to eight-week lows as investors saw relief for the bond market following a Democratic sweep in the midterm elections, according to the report.^[1] Treasury yields measure the return available to investors buying US government debt at current prices; yields fall when bond prices rise.

The rally in long-term Treasuries lowers a benchmark used to price many private loans.^[1] In the November 5 session, the 10-year yield stood at 4.84%, down 0.06 percentage points from the previous session, while the 30-year yield was 5.25%, down 0.03 points. If lenders and bond investors do not demand more compensation for credit risk, new loans and replacement borrowing can become cheaper, easing company interest costs and improving homebuyers’ purchasing power.

Lower Treasury yields also reduce the return investors can earn from low-risk bonds, supporting stock valuations—particularly for businesses whose value depends heavily on profits many years ahead. Those effects depend on yields staying lower; the report links the rally to the election result but identifies no specific policy change.^[1]

Impact

• HomebuildersOpportunity

  Homebuilders could attract more buyers if lower long-term Treasury yields feed through to mortgage rates and reduce monthly payments. The benefit depends on mortgage lenders lowering their quotes.^[1]

• Commercial property and real estate investment trustsOpportunity

  Property owners replacing maturing debt may secure cheaper financing. Savings depend on the risk premium lenders require, and interest expense on existing fixed-rate debt does not fall immediately.^[1]

• Technology and other growth stocksOpportunity

  Investors may pay more for future profits as low-risk bond returns fall. Companies with more of their expected earnings far in the future are especially sensitive to this valuation effect, while actual earnings still depend on business performance.^[1]

What to watch next

• The October US jobs report arrives November 6 at 13:30 UTC. Payroll growth is forecast at 65,000, up from 29,000; stronger-than-expected hiring or wages could push yields back up and weaken the financing relief.
• October US consumer inflation is due November 10 at 13:30 UTC. Core inflation, which excludes food and energy, is forecast to slow to 0.2% month over month from 0.3%; the result will test whether inflation pressure supports lower yields.