10-year Treasury yield slides as traders mull over Democrats midterm victories, oil prices drop

The 10-year Treasury yield fell on Wednesday as investors weighed big wins from Democrats in the U.S. midterm elections and oil prices pulled back.

The benchmark 10-year Treasury note yield was down more than 5 basis points at 4.898%. The 30-year bond yield declined more than 3 basis points to 5.293%, and the shorter-term 2-year note yield dropped more than 4 basis points to 4.573%.

One basis point equals 0.01%, or 1/100th of 1%, and yields and prices move inversely to one another.

Democrats obtained majorities in both the House and Senate. Democrats flipped Senate seats from Republicans in Iowa, Kansas, North Carolina, Ohio, South Carolina, Maine and Texas. They also won key gubernatorial races in Ohio and Texas.

The resounding victory by Democrats could rein in government spending from the Trump administration, as it makes it harder for the White House to push legislation through Congress.

Traders at JPMorgan said one of the issues Wall Street is focusing on after the midterms is “reduced deficit spending.”

“This can be achieved by asserting power over the budget and likely wading through a government shutdown,” they said.

JoAnne Bianco of BondBloxx said that a stronger Treasury market in response “makes sense,” adding that “a more divided policy environment should make deficit growth more difficult and potentially improve the fiscal outlook.”

“Looking ahead, attention will shift back to geopolitics and the ongoing health of the U.S. economy,” the investment strategist said. “For now, there appears to be no immediate move toward escalating tensions with Iran, which should help keep energy prices and inflation pressures contained.”

Oil prices dropped on Wednesday, with Vice President JD Vance blaming the Iran war for the Republican Party’s election losses. U.S. West Texas Intermediate crude futures fell 8% to around $88 per barrel, while Brent crude futures declined 8% to roughly $94.