Investors have tended to react to the prospect of a Trump win by pushing Treasury yields higher, in part on the assumption his economic policies would add to inflation and debt
U.S. bond futures slid and the dollar firmed on Monday as investors wagered the attack on U.S. presidential candidate Donald Trump made his victory more likely, while injecting a whole new level of political uncertainty into markets.
A holiday in Japan made for thin trading conditions and the early action was confined to a modest increase in the dollar while Treasury futures slid.
Investors have tended to react to the prospect of a Trump win by pushing Treasury yields higher, in part on the assumption his economic policies would add to inflation and debt.
Proposals to levy tariffs on imports would push prices higher while eating into consumer spending power. Meanwhile, restrictions on migration could tighten the labour market and put upward pressure on wages.
The market reaction function to a Trump presidency has been characterised by a stronger U.S. dollar and a steepening of the U.S. Treasuries curve, so we might observe some of that this coming week if his election odds are evaluated to have further improved following this incident, said Rong Ren Goh, a portfolio manager at Eastspring investments in Singapore.
Online betting site PredictIT has a Republican win at 66 cents, from 60 cents on Friday, with the Democrats at 38 cents. The current odds suggest that Republicans are twice as likely to win the election as Democrats.
The dollar rose 0.3% on the Japanese yen to 158.05 but remained well short of its recent 161.96 top following a suspected intervention.
The euro dropped marginally to $1.0887, and the dollar index firmed to 104.26.
Futures for 10-year Treasuries slid 13 ticks, while cash bonds were untraded due to the Japanese holiday.
S&P 500 futures and Nasdaq futures were both slightly higher.
Japan’s Nikkei was shut, but futures were trading at 41,285 compared to a cash close of 41,190.
