Late in New York trading, yields hovered near session highs, with the two-year up 3.5 basis points to top 4.20%. The moves were larger for longer-dated benchmarks, with both 10- and 30-year yields up nearly 10 basis points.
Yields had climbed roughly 60 basis points throughout October, causing a Bloomberg gauge of the debt to post its worst monthly loss since 2022. Leading into Friday’s data, traders in the options markets had been hedging against a deeper selloff in Treasuries and liquidating positions in anticipation of next week’s risk events.
Volatility has been rising as Kamala Harris and Donald Trump face off in a tight race for the White House on Nov. 5.
The ICE BofA Move Index, a closely watched gauge of U.S. bond-market volatility, closed at its highest this year this week, showing that traders are paying up to protect against increased turbulence. The Fed meets on Nov. 7, just two days after the vote.
“Clearly, there is risk next week in terms of uncertainty around the election,” said Roger Hallam, global head of rates at Vanguard. And the recent string of firmer data mean “the outcomes for Fed policy next year also widen — and that feeds into relative market volatility as well.”
Bond investors will also have to contend with a trio of Treasury auctions — including a sale of three-year notes Monday and the big quarterly 10-year and 30-year new issues on Tuesday and Wednesday.
Each sale will take place a day earlier than normal practice, giving dealers less time to prepare. Monday is a bank holiday in Japan, further curtailing the pre-auction period.
“Next week is an uncertain environment and one where the market is a little less willing to take down risk,” said Hallam. “There is a bit of a concession being built in ahead of the next Treasury supply to ensure it goes smoother.”
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