A specialist trader works inside a post on the floor at the New York Stock Exchange on Oct. 23, 2024.
Brendan McDermid | Reuters
Treasury yields were little changed in the early trading Tuesday evening as investors awaited results from the tight presidential race between Vice President Kamala Harris and former President Donald Trump.
The 10-year Treasury yield was unchanged around 4.30%. The yield on the 2-year Treasury was up 2 basis points to 4.22%. One basis point is equivalent to 0.01%. Yields and prices have an inverted relationship.
Bond yields could see a big pop in the event of a Trump win — and they could surge in a Republican sweep, where the party captures control of Congress and the White House. That’s because Republicans may introduce tax cuts and steep tariffs, moves that could widen the fiscal deficit and reignite inflation.
“If there’s a Republican sweep of House, Senate and the presidency, I expect the bond market to be wobbly,” Jeremy Siegel, finance professor at the Wharton School of the University of Pennsylvania, said on CNBC’s “Squawk Box” Tuesday. “I expect them to be worried that Trump would enact all those tax cuts, and I think bond yields would rise.”
Neither Trump nor Harris really promised fiscal discipline on the campaign trail, raising worries that investors will demand higher yields in exchange for holding Treasuries as the government is forced to issue more and more debt to fund its ballooning spending.
The yield can be expected to approach 4.5% in the event of a Trump win, or fall toward 4% under a Harris victory, according to Stephanie Roth, chief economist at Wolfe Research.
A Harris administration with a divided Congress may prompt bond yields to retreat.
“I think a split Congress, whoever wins the presidency, is probably the favorite for the markets, so that neither candidate can get his or her full plan pushed through,” Siegel said.
The benchmark 10-year Treasury yield surged 50 basis points in October, marking the biggest monthly increase since September 2022.
On Thursday, the Federal Reserve will make its next decision on interest rates and is widely expected to slash rates by a quarter point.
Check out the companies making headlines in premarket trading. Novo Nordisk — The stock jumped about 5%, rebounding from the nearly 18% losses seen in the previous session. On Friday, the Danish pharmaceutical giant’s experimental weight loss drug, CagriSema, reported late-stage trial results that missed expectations . Honda – U.S.-listed shares surged 15% after the company officially began merger talks with fellow Japanese automaker Nissan. The automakers plan to conclude discussions in June 2025. Xerox — The document services provider added nearly 7% after announcing its acquisition of printer maker Lexmark. The deal is worth $1.5 billion. Occidental Petroleum , Sirius XM , VeriSign — The stocks continued to rise in Monday’s premarket after Warren Buffett disclosed last week that his Berkshire Hathaway conglomerate added to its stake in each name. Occidental and Sirius XM each climbed more than 2%, while VeriSign advanced 1.8%. Tesla — The electric vehicle maker bounced 3% before the bell, regaining some ground after last week’s decline. Tesla slid 3.5% last week, which marked its worst weekly performance since before the U.S. presidential election. Despegar.com — Shares soared 32% after Prosus entered into a definitive agreement to buy the Argentina-based online travel platform for $19.50 per share. Prosus will pay $1.7 billion as part of the deal, which is expected to close in the second quarter of 2025. Traws Pharma — Shares of the clinical-stage virology company skyrocketed more than 76% after it announced progress in the development of its treatment for H5N1 bird flu. The company said tivoxavir marboxil showed safety and tolerability in the phase 1 trial, and it will begin a phase 2 study early next year. The news comes as the threat of bird flu is expected to rise. Immunocore — The biotech stock rose more than 5% on word that the first patient has been dosed with its experimental immunotherapy treatment, IMC-0115C. — CNBC’s Sean Conlon and Christina Cheddar Berk contributed reporting
Investors may want to consider adding exposure to the world’s second-largest emerging market.
According to EMQQ Global founder Kevin Carter, India’s technology sector is extremely attractive right now.
“It’s the tip of the spear of growth [in e-commerce] … not just in emerging markets, but on the planet,” Carter told CNBC’s “ETF Edge” this week.
His firm is behind the INQQ The India Internet ETF, which was launched in 2022. The India Internet ETF is up almost 21% so far this year, as of Friday’s close.
‘DoorDash of India’
One of Carter’s top plays is Zomato, which he calls “the DoorDash of India.” Zomato stock is up 128% this year.
“One of the reasons Zomato has done so well this year is because the quick commerce business blanket has exceeded expectations,” Carter said. “It now looks like it’s going to be the biggest business at Zomato.”
Carter noted his bullishness comes from a population that is just starting to go online.
“They’re getting their first-ever computer today basically,” he said, “You’re giving billions of people super computers in their pocket internet access.”
“I think the best case scenario is we’re going to continue to see mortgage rates hover around six and a half to 7%,” said Jordan Jackson, a global market strategist at J.P. Morgan Asset Management. “So unfortunately for those homeowners who are looking for a bit of a reprieve on the mortgage rate side, that may not come to fruition,” Jordan said in an interview with CNBC.
Mortgage rates can be influenced by Fed policy. But the rates are more closely tied to long-term borrowing rates for government debt. The 10-year Treasury note yield has been increasing in recent months as investors consider more expansionary fiscal policies that may come from Washington in 2025. This, combined with signals sent from the market for mortgage-backed securities, determine the rates issued within new mortgages.
Economists at Fannie Mae say the Fed’s management of its mortgage-backed securities portfolio may contribute to today’s mortgage rates.
In the pandemic, the Fed bought huge amounts of assets, including mortgage-backed securities, to adjust demand and supply dynamics within the bond market. Economists also refer to the technique as “quantitative easing.”
Quantitative easing can reduce the spread between mortgage rates and Treasury yields, which leads to cheaper loan terms for home buyers. It can also provide opportunities for owners looking to refinance their mortgages. The Fed’s use of this technique in the pandemic brought mortgages rates to record lows in 2021.
“They were extra aggressive in 2021 with buying mortgage-backed securities. So, the [quantitative easing] was probably ill-advised at the time.” said Matthew Graham, COO of Mortgage News Daily.
In 2022, the Federal Reserve kicked off plans to reduce the balance of its holdings, primarily by allowing those assets to mature and “roll-off” of its balance sheet. This process is known as “quantitative tightening,” and it may add upward pressure on the spread between mortgage rates and Treasury yields.
“I think that’s one of the reasons the mortgage rates are still going in the wrong direction from the Federal Reserve’s standpoint,” said George Calhoun, director of the Hanlon Financial Systems Center at Stevens Institute of Technology.