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TREASURIES-US 10-year notes steady, focus on election
November 5, 2012 / 4:35 AM / 5 years ago

TREASURIES-US 10-year notes steady, focus on election

SINGAPORE, Nov 5 (Reuters) - U.S. 10-year Treasuries held steady in Asia on Monday as investors awaited the outcome of Tuesday’s presidential election.

* Ten-year Treasuries were little changed in price to yield 1.716 percent. The 10-year yield stayed well below Friday’s intraday high of 1.781 percent.

On Friday, safe haven Treasuries had sold off initially after a strong jobs report, but later pared their losses as equities came under pressure.

* Polls show that the election on Tuesday between President Barack Obama and Republican challenger Mitt Romney will be a very close race.

Traders and analysts are focusing on how the election outcome may affect policies to address the “fiscal cliff” of about $600 billion in government spending cuts and higher taxes set to take effect in January.

The election may also have an impact on the market’s expectations about the outlook for the Federal Reserve’s monetary policy.

“If Obama wins, U.S. 10-year yields are likely to decline to 1.5 percent or lower as fiscal cliff-related worries pick up. If Romney wins, 10-year yields should rise to 2 percent on the perception of a relatively hawkish Fed,” analysts for Barclays said in a research note.

* Romney has said that if he wins the Nov. 6 election, he would not reappoint Ben Bernanke as Federal Reserve Chairman when Bernanke’s term expires in January 2014.

That has stirred market speculation that the Fed might be more likely to end its accommodative monetary policy earlier under Romney than would be the case if Obama were re-elected.

* Treasuries probably won’t react very much to economic indicators going into Tuesday’s election, said a trader for a U.S. brokerage house in Tokyo. The Institute for Supply Management’s survey of the services sector is coming up later on Monday.

“But once the election is over, I think the market will have little choice but to shift their attention back to economic data,” the trader said, adding that bond yields could head higher if that turns out to be the case.

Recent U.S. indicators, including data pointing to a strengthening recovery in the housing sector, have spurred some optimism about the economy’s outlook.

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