Bond yields rise amid possible Georgia ‘blue sweep’ and oil twists

LONDON (Reuters) – Bond yields rose and the dollar fell on Wednesday with the prospect of another stimulus if Democrats take control of the US Senate following a run-off in Georgia, while oil has reached an 11-month high after Saudi Arabia agreed to cut production more than expected.

Democratic challenger Raphael Warnock has beaten Republican incumbent President Kelly Loeffler in one of two races for the state Senate, according to forecasts by TV channels and Edison Research. Democratic challenger Jon Ossoff had a slim lead over Republican David Perdue in the other, with 98% of the votes counted, according to Edison. here

With a narrow majority for Democrats in the House of Representatives, a “blue sweep” of Congress could usher in a bigger fiscal stimulus and pave the way for President-elect Joe Biden to push for more business regulation and higher rates. taxes.

“A Democrat-led government should add more stimulus, essentially spend more, to help ease the virus crisis,” said Paul Sandhu, head of multi-asset quantitative solutions, APAC, at BNP Paribas Asset Management in Hong Kong . “It means there will be a weaker dollar.”

Analysts generally assume that a Democrat-controlled Senate would be positive for global economic growth and therefore for most riskier assets, but negative for bonds and the dollar under the assumption that the US budget and trade deficits increase. even more.

The yield on 10-year U.S. Treasuries rose above 1% for the first time since March, amid expectations of a larger government borrowing in a 50-50 split Senate with the Vice President-elect Kamala Harris, as Speaker of the Upper House, becoming the link. breaker.

For a graph of the 10-year US Treasury yield above 1%:

“History tells us that it is much easier to get things done when a party is in control, because Democrats and Republicans have struggled to cooperate for at least 30 years,” Danske analysts said in a note.

German bond yields followed Treasuries to reach their nearly five-week high. [GVD/EUR]

The euro hit $ 1.2344, a level last seen in April 2018, while the yen hit a 10-month high at 102.57 per dollar. The dollar hit its lowest level in nearly six years against the Swiss franc.

Bitcoin rose more than 5% to a record high of $ 35,879.

Global equities advanced 0.1%, returning to recent highs, and European equities advanced 0.08%.

But futures on the U.S. benchmark S&P 500 fell 0.7%, while futures on the Nasdaq slipped 2.1%, fearing Democrats would pursue tighter regulations on large technology companies.

Other industries, such as banking, oil and gas, and healthcare, could come under more scrutiny, while infrastructure and alternative energy sectors could benefit.

OIL RISE

Oil prices hit their highest since February 2020 after Saudi Arabia agreed to cut production more than expected in a meeting with allied producers, while industry figures showed stocks of US crude was down last week. [O/R]

US crude futures peaked at $ 50.24 a barrel before slashing gains, after climbing 4.9% on Tuesday.

International benchmark Brent futures rose 0.54% to $ 53.89.

In Asia, the Japanese Nikkei fell 0.4% while the MSCI Asia-Pacific ex-Japan index erased earlier gains to stabilize.

Shanghai stocks extended their gains, with the CSI300 index rising 0.7% and reaching its best levels since 2008, ignoring the chaotic handling of the New York Stock Exchange over how it will treat Chinese companies to comply with sanctions set by the Trump administration.

The stock market made a second sudden turn, saying it would reconsider its plan to allow three Chinese telecom giants to remain listed.