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German bunds and US Treasuries under slight pressure ahead of presidential debate

Wed, 21st Oct 2020 16:29

(Sharecast News) - Yields on longer-dated euro area government debt were a tad higher in the middle of the week, adding to the prior session's gains.
As of 1614 BST, the yield on the benchmark 19-year German bund was one basis point higher to -0.59%, having reached 0.57% earlier in the same session.

In parallel, yields on similarly-dated US Treasuries were up by two basis points at 0.81%, having earlier hit 0.83%.

Keeping the selling pressure on bonds on both sides of the Atlantic was growing speculation that US lawmakers would at some point agree on a foruth fiscal package, although some traders believed that might not occur until after the 3 November election.

Bond prices move in the inverse direction of their yield.

To take note, the US presidential incumbent, Donald Trump, and his Democratic rival, Joe Biden, were shceduled to hold a second televised debate the next day, the result of which might yet decide the outcome of the vote.

Market commentary was also increasingly focusing on the possibility that the Democratic party might be on course for a clean sweep of both chambers of Congress as well as the White House.

Depending on the outcome of Thursday's debate, markets' expectations for US fiscal policy could yet shift perceptibly.

In the background meanwhile, there were growing expectations that central banks - especially the European Central Bank - might be set to ramp-up their bond buying programme as the second wave of the pandemic weighed on prospects for the economic recovery globally.

Despite that, if not precisely because of it, the inaugural sale by the European Union just the day before, of €17bn in debt to combat the pandemic, was oversubscribed by a staggering 13.7 times, analysts at Rabobank pointed out.

The Dutch broker was of the opinion that EU debt sales would not 'crowd out' demand for safe haven government debt in the single currency bloc and that, thanks to the ECB, any rise in yields would prove temporary.

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