The outcome of the elections in the United States will be decisive for the markets. In addition to the impact this could have on listed companies, the bond market will be directly affected by the policies adopted by the world’s largest economy. The US bond will be the first to be affected by the presidential elections, and this has been proven by the movements that have occurred, in the rise in yields, throughout October, as the chances of victory of Donald Trump in the elections were increasing. NOW, The major analysis houses highlight their projections and the impact that the electoral results will have on the American bondand the strategy repeats itself: if Trump wins, especially if he wins with a victory in Congress, debt sales will continue. On the contrary, if Harris wins, it will be time to buy bonds.
From the current levels at which the American fixed income security with a maturity of 10 years is evolving, at a profitability of 4.3%, The direction that this asset, considered one of the main safe havens of the market, takes will depend on who wins the elections. Trump’s program is more inflationary than Harris’s: both propose an increase in the country’s budget deficit, but the Republican candidate includes other inflationary measures in his program, such as the imposition of high customs duties and the tightening of immigration policy.
This is why the major analyst houses agree on the bond investment strategy with the elections in the background: if Harris wins, it is time to return to the bond, but if Trump wins, there will always be upward pressure on yields. of the security and, consequently, potential declines in its price.
Wells Fargo
The American bank believes that “the market is overly confident in a victory for Trump and the Republicans in Congress”, and is now warning investors that “in the event of a Harris victory, we expect US bonds to reach yields at the 4% maturity of the 10-year security in one or two weeks. If Trump and the Republicans’ victory in Congress actually happens, “we’ll see yields rise between 10 and 15 basis points.”
Société Générale
In a similar vein to Wells Fargo, the French bank warns that although the election results “will be critical” for the bond, “a point has been reached where investors can consider investing in a reversal of recent movements” , that’s to say. , buy at current levels. Of course, just like the American bank, the Company warns that “a Harris victory is an opportunity to buy bonds, while a Trump victory, and a Republican victory in Congress, could result in a further rise bond yields. .
J.P. Morgan
The U.S. bank is clear that moves in the nation’s debt market in recent weeks are linked to Trump’s improving election expectations, but it believes the wave of selling will continue if Trump ultimately wins and if the Republicans win Congress. “In this case, yields could rise to 4.6%”warn the bank’s strategists. Of course, the selling has taken the stock to a level where “there is room for yield declines if Congress is divided, and especially if Harris ends up winning the election.”
TD Securities
The Canadian investment bank warns that “a Harris victory will boost fixed-income buying as investors lower their expectations of higher inflation and a larger deficit.”
Barclays
British bank analysts recall that “a Republican wave [una victoria en las cámaras de representantes] This will be negative for bond prices, as markets may not have fully priced in this possibility. However, a Harris victory, combined with divided government, will generate declines in profitability across the entire US debt interest curve,” they warn.
Goldman Sachs
“A Harris victory, with a divided government, will generate an influx of bond purchases, and a drop in volatility,” they explain from the American bank. On the contrary, “a Republican victory should increase yields and steepen the interest curve.” [ventas más agresivas en los vencimientos más largos del espectro de deuda estadounidense]and increase volatility”, they recall.
BMO Capital Markets
For the investment bank of the Bank of Montreal, it is clear that “the current configuration of financial markets maintains the balance of risks in favor of adding duration”. [comprar los plazos de la deuda más largos] in case there is an increase in yields after the elections”, but they are also clear that it will be necessary “continue fixed income rally in case Harris wins”.
