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<\/p>\nFollowing the election results, investors rushed to sell off U.S. Treasuries. On Monday, November 14, yield curve rate on 10-year Treasuries jumped 8 basis points from the previous day to 2.23% (According to the U.S. Treasury) \u2013 the highest level since the beginning of the year. Only four months back, yields were at record lows.<\/p>\n
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Source: U.S. Department. of the Treasury<\/strong><\/em><\/p>\n Yield curve rates on 30-year Treasury rose to 2.99%, which is the largest after January 5. Yields on 2-year Treasury notes climbed to 1% (a first since January 2016).<\/p>\n The massive sell-offs were possibly driven by expectations about the new government\u2019s fiscal stimulus. To finance increased spending, the government could issue bonds \u2013 which means, bond prices could drop. So, investors are rushing to dispose of their bond holdings now, probably to avoid capital losses later.<\/p>\n While betting on the Republicans to pursue demand-boosting policies, many investors are possibly factoring in higher inflation expectations, and with that upward momentum in yields. That\u2019s because increased inflation could lead people to demand higher bond yields to compensate for lower purchasing power of money. In fact, the divergence between yields on 10-year Treasuries and Treasury Inflation-Protected Securities widened to around 1.97 percentage points \u2013 the largest since April 2015.<\/p>\n In addition, uncertainty around the new U.S. government\u2019s policies\/strategies and their impact (both domestic and global) could be driving investors across the world to shift their holdings away from bonds, at least for some time. Worldwide, bonds have already lost $1.2 trillion in value following the election (according to Bloomberg).<\/p>\n The turnaround in the U.S. government bond market was also reflected in the surge in volatility, with the CBOE\/CBOT 10-Year Treasury Note Volatility Index peaking to its highest level since February.<\/p>\n Source: CBOE<\/strong><\/em><\/p>\n The bond sell-offs on Monday may have far exceeded \u2018normal\u2019 levels. The 10-year yield\u2019s Relative Strength Index increased to about 83 \u2013 the highest since 1990. Any value over 70 represents a possible \u201coverbuying\u201d of yields (i.e., over-selling of bonds).<\/p>\n Bottom Line for Investors\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/strong><\/p>\n Volatility following an election is not surprising. But more importantly, it should not worry investors as long as the domestic fundamentals are sturdy, which they are. Moreover, for the Treasury market, where yields this year have trended downward for a while, the recent spike should not be bothersome – it could even signal a correction.<\/p>\n It\u2019s too early to \u2018time\u2019 the new government\u2019s policies and their economic effects. What\u2019s essential for an investor is that they trust fundamentals while picking securities for their portfolio and maintain a discipline that aligns with their long-term goals\u2014fretting over volatility does not help. At Zacks Investment Management, we can help you stay on track and optimize long-term returns. Get insights into various industries and equity categories with our\u00a0Stock Market Outlook report. To download this report, click on the link below<\/p>\n \n","protected":false},"excerpt":{"rendered":" Following the election results, investors rushed to sell off U.S. Treasuries. On Monday, November 14, yield curve rate on 10-year […]<\/p>\n","protected":false},"author":1,"featured_media":4124,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[71,72],"tags":[],"class_list":["post-3593","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-private-client-group","category-steady-investor-news"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/3593","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=3593"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/3593\/revisions"}],"predecessor-version":[{"id":11123,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/3593\/revisions\/11123"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=3593"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=3593"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=3593"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![](\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/11.22.16-Bond-Yields-Image-2-of-2.png\")
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