Bond markets staged a convincing intraday recovery on Tuesday, with treasury prices climbing well off their early session lows to close modestly higher.
The benchmark ten-year note yield fell 2.0 basis points to settle at 4.289 percent, after earlier reaching an intraday high of 4.366 percent.
Tuesday’s move extended the pullback already seen on Monday, pushing yields further below the nearly four-month closing high recorded the previous Friday.
Early selling pressure reflected optimism that the U.S. economy would continue to perform well regardless of the outcome of Tuesday’s elections.
Polls showed an extremely tight race between Vice President Kamala Harris and former President Donald Trump, with the presidential result potentially not known by the end of election night.
Economic data released during the session added to the positive sentiment surrounding the broader U.S. economy heading into the vote.
A report from the Institute for Supply Management showed service sector activity unexpectedly grew at an accelerated rate in October, catching markets off guard.
The ISM said its services PMI rose to 56.0 in October from 54.9 in September, with any reading above 50 indicating expansion in the sector.
The result surprised economists who had expected the index to dip to 53.8, and marked the highest services PMI reading since the index hit 56.4 in July 2022.
The treasury market’s recovery gathered momentum after the Treasury Department revealed that its auction of $42 billion worth of ten-year notes attracted above-average demand from investors.
The ten-year note auction drew a high yield of 4.347 percent and a bid-to-cover ratio of 2.58, compared to the average bid-to-cover ratio of 2.51 across the ten previous ten-year note auctions.
The bid-to-cover ratio measures demand by indicating the amount of bids received for each dollar worth of securities being sold, making it a closely watched indicator of investor appetite.
Strong auction results are generally a positive signal for the bond market, suggesting investors remain willing to absorb new government debt supply at competitive yields.
With the domestic economic calendar light for the remainder of the week, attention is expected to remain firmly fixed on election developments and any emerging clarity around the presidential result.
