Treasury yields rise after positive Senate vote on shutdown bill

Yields on the benchmark 10-year note were up about 4 basis points to 4.14% after the 60–40 vote, reversing part of October’s rally in government debt.

The rise in yields came immediately after senators from both parties backed a compromise funding bill that would run through the end of January and repay furloughed federal workers. Dealers said the vote was the first credible signal that the longest US shutdown on record, which began on October 1, could be wrapped up within days, so investors trimmed stock positions they had built as a hedge against prolonged government disruption. The move out of Treasuries also tracked a broader risk-on shift that pushed European stocks higher and lifted US equity futures.

Strategists said the shutdown itself had supported Treasuries for most of October because missing labor, inflation and trade reports made it harder to price the economy and kept the Federal Reserve’s next steps uncertain. With the Senate now moving toward reopening, traders can start to look ahead to a backlog of data and to renewed Treasury issuance — both of which tend to pressure yields higher once the government is functioning again. A similar view was reflected in recent rates polls, which already foresaw the 10-year drifting back toward 4.20%–4.25% over the next few months as fiscal strain and heavy supply reassert themselves.

“Markets are warming up to the idea that the U.S. shutdown is nearing an end,”

noted Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities. He projected a House vote on Wednesday and a government reopening by Friday, contingent on approvals.

Selloffs in Treasuries were broad-based, with yields higher “across the curve,” though the 10-year remained the reference point for the market.