The yield on U.S. Treasury bonds has declined markedly, while market participants continue to monitor the situation around the presidential election and prepare for the Fed meeting.
The yield on 5-year Treasury bonds fell by 6.4 basis points, reaching 4.151%, while the yield on 30-year bonds was 4.491% (-6.8 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, decreased by 3.7 basis points to 4.166%, while the yield on 10-year bonds fell to 4.299% (-6.4 basis points).
The Des Moines Register/Mediacom Iowa Poll showed that Kamala Harris up 3 points on Donald Trump in the state. This is a major shift from a few weeks ago. This poll has a very good track record and is considered a bellwether for votes across the swing states. However, the average of opinion polls is still too close to call. Analysts tend to assume Trump's policies on immigration, tariffs and tax cuts would put a lot more upward pressure on the U.S. dollar and yields, than a Harris victory.
As for the Fed meeting, its results will be announced on Thursday, while investors are fully confident that the Central Bank will reduce the interest rate by 0.25% - regardless of the outcome of the presidential election. However, the future prospects of monetary policy could easily change depending on who becomes president-elect. According to the CME FedWatch Tool, markets see a 100% probability of a 0.25% rate cut at the November meeting (compared to 95.8% a week earlier) and a 83.4% probability of a 0.25% rate cut in December (compared to 69.0% a week earlier).