FX.co ★ Treasury Yields Fall as Democrats Sweep Congress

The yield on the US 10-year Treasury note fell to 4.93% on Wednesday, as traders responded to the Democratic sweep of Congress in the midterm elections. While a Democratic victory raises the likelihood of tighter regulatory scrutiny—particularly in the AI sector—it is also viewed as limiting the scope for additional tax cuts and new government spending, thereby easing concerns about increased federal borrowing. At the same time, tighter AI regulation could dampen growth prospects and reduce the need for further interest-rate hikes.

Market pricing currently assigns a roughly 77% probability to a 25-basis-point rate increase by the Federal Reserve in December, down from about 84% a week earlier. Separately, the US Treasury said on Monday that it now expects to borrow $618 billion in the fourth quarter, $10 billion less than projected in August. The downward revision primarily reflects a higher-than-expected opening cash balance, partially offset by weaker projected net cash flows. However, excluding the benefit of this larger initial cash cushion, fourth-quarter borrowing needs are $24 billion higher than previously estimated.