Treasury yields backed up on Wednesday morning as investors absorbed the midterm election results and waited for the Treasury’s quarterly refunding statement. The 10 year note yield rose 5.8 basis points to 4.95 percent, its largest one day increase since late September, the 30 year bond rose 5.5 basis points to 5.32 percent, the 5 year rose 5.0 basis points to 4.74 percent and the policy sensitive 2 year rose 3.1 basis points to 4.61 percent. The dollar index eased 0.4 percent to 101.43, so the move was a curve selloff rather than a broad dollar bid.
The refunding statement, due at 8:30 AM Eastern today, frames the supply side of that selloff. The Treasury said in its August statement that the next quarterly refunding announcement would take place on November 4, and on Monday it estimated privately held net marketable borrowing of $618 billion for the October to December quarter and $800 billion for January to March 2027. If auction sizes are left unchanged, next week’s refunding auctions total $125 billion: $58 billion of 3 year notes on November 9, $42 billion of 10 year notes on November 10 and $25 billion of 30 year bonds on November 12.
Dealers broadly expect exactly that outcome for now, Reuters reported, with coupon sizes held steady and the argument pushed into 2027, when primary dealers expect the Treasury to consider cutting 20 year and 30 year auction sizes while increasing issuance in the 2 to 10 year sector. The statement is also expected to say more about the size of liquidity support buybacks in the long end, after the Treasury enlarged those operations in September and took the full $6 billion maximum in the 20 to 30 year bucket on October 27. A separate $6 billion liquidity support buyback in the 10 to 20 year bucket runs today at 1:40 PM Eastern.
The election result cuts both ways for the long end. Democrats have won the Senate and are projected to take the House, which limits the scope for new fiscal expansion and, on the pre-election analysis, is the outcome bond investors rated most favourable for prices. Against that, a Democratic Congress raises the odds of a contested debt ceiling fight when borrowing authority expires in the second half of 2027, and the morning’s price action suggests supply and the refunding, not the election, are doing the work in yields today.