US Bond Yields fall after midterm election 2026 results: Why are 10-year, 30-year, 2-year treasury notes down?

US bond yield on the benchmark 10-year Treasury note was down by 6 basis points to 4.89 per cent. The yield on the 30-year bond fell 4.5 basis points to 5.279 per cent after earlier hitting a high of 5.3448 per cent, which was its highest level since October 29. The two-year US Treasury yield fell 3.5 basis points to 4.579 per cent after dropping earlier to 4.5458 per cent, which was its lowest point since September 10.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, flattened to a positive 30.9 basis points.

Investors were also digesting an update from the US Treasury Department, which altered its language regarding future auction sizes in a shift that analysts expect will pave the way for larger sales of short- and intermediate-dated debt and possible cuts to longer-dated auctions.


Why are US Bond Yields Down?

US Treasuries were down after Democrats gained control of both the Senate and House with the election results also raising the prospect of gridlock between the US Congress and Donald Trump's White House. Some investors were betting that gridlock in Washington could limit government spending, and that a drive by Democrats to regulate AI would slow growth and ease inflation.

Meanwhile, investors bought Treasuries in reaction to a more than 8% tumble in oil prices for their lowest settlement since late August as investors bet that the shift in power could hasten the end of the US-Israeli war on Iran. Trump acknowledged that the war, which he started along with Israel eight months ago, had played a role in the Republican Party's crushing defeat.

While Trump told the Financial Times that the US had no immediate plans to strike Iran, his Vice President JD Vance questioned the war's worth and blamed it entirely for the stinging electoral rebuke.

After falling sharply as election results trickled in late on Tuesday, US Treasury yields had pared declines by the time US equity markets opened with strong gains on Wednesday. But as the day wore on, yields reversed course again to turn sharply lower.

US Bank Head of Capital Markets Research Bill Merz said that inflationary pressures could ease due to moderation in AI-related growth and weaker oil prices as support in Congress for the Iran conflict declines going forward.

The 10-year TIPS breakeven rate was last at 2.252%, indicating the market sees inflation averaging about 2.3% a year for the next decade.

Merz said that a legislative stalemate between Congress and the White House could limit spending in the near term. For example, Trump had promised a $5,000 payment to adult citizens if Republicans held on to Congress, which would have cost the US $1.2 trillion, or 16% of the federal budget.