10-year Treasury yield flirts with 0.80% as Pelosi suggests there is still time for pre-election fiscal stimulus deal

“Short term, the market will continue to watch the dynamics in Washington but should be more resigned to no deal before the election,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities.

U.S. Treasury yields rose Tuesday as investors contemplated the prospect of a pre-election fiscal stimulus deal in Washington, after House Speaker Nancy Pelosi suggested there still remained a window for an agreement to be struck.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 0.820% climbed 3.6 basis points to 0.796%, its highest close since June 9, while the 2-year note rate TMUBMUSD02Y, 0.149% held steady at 0.145%. The 30-year bond yield TMUBMUSD30Y, 1.628% added 5.6 basis points to 1.603%, highest since June 8.

What’s driving Treasurys?

Stimulus negotiations managed to grab the attention of jaded market participants after House Speaker Nancy Pelosi backed down from her previously imposed deadline of Tuesday for a pre-election deal to be agreed in principle.

She said the bill would need to be written before the end of the week if was to get passed by chambers of Congress next week.

Investors are pessimistic on the potential for a pre-election agreement on a coronavirus relief package but are still hoping for a late breakthrough.

In U.S. economic data, housing starts in September increased 1.9% to run at annualized pace of 1.415 million. MarketWatch-polled analysts had penciled in a forecast of 1.450 million.

On Monday, the NAHB home builders’ index hit a record in October as buyers continued to snap up new properties.

As for the Federal Reserve, Chicago Fed President Charles Evans called for lawmakers to pass additional stimulus measures to support the economy, while Fed vice chairman for supervision Randal Quarles said the market turmoil earlier in the year revealed weaknesses in the U.S. financial system.

What did market participants’ say?

“Short term, the market will continue to watch the dynamics in Washington but should be more resigned to no deal before the election,” said Gregory Faranello, head of U.S. rates at AmeriVet Securities.