Treasury prices likely to remain volatile until U.S. election outcome; good to hold positions

Global Treasury prices are likely to remain highly volatile ahead of the United States’ presidential election scheduled for Tuesday, November 8, 2016. We suggest that investors should retain their positions until the election result is revealed and also avoid creating any new positions.

Global Treasury yields jumped Monday after FBI Director James Coney released an official statement over the weekend saying that Hillary Clinton has been cleared of all charges, remaining stern in their conclusions expressed in July with respect to Secretary Clinton. This announcement removed clouds of suspicion around her campaign and potential Presidency.

Treasury bond yields rose across the curve after FBI cleared Clinton on classified emails. Australia's 10-year yield rose 2 basis points to 2.344 percent, South Korea's 10-year yield added 3 basis points to 1.726 percent and Japan's 30-year yield increased 1 basis point to 0.495 percent.

According to latest polls from WSJ/NBC, Clinton is still ahead in the election but Trump is with all the momentum. She is ahead 44 percent to 40 percent in the poll but that's down from 48 percent to 37 percent in a poll from the same firm in mid-October. The survey has Johnson at 6 percent and Stein at 1 percent.

Last week, election polls showed a tighter race between the two Presidential candidates. The RealClearPolitics poll displayed that Democratic nominee Hillary Clinton’s lead over her Republican rival Trump has narrowed down to 2.2 percentage points from previous more than 7 points. The market was wary of a Brexit-like outcome at the presidential election scheduled tomorrow.

Additionally, Treasury prices rallied last week as investors assume that the triumph of Republican Party nominee Donald Trump over Democratic Clinton will weaken the greenback against major trading currencies, while boosting demand for safe-haven assets.