Bunds also drop relative to higher-yielding peers in euro area Shorter-dated Treasury notes signal Fed rate increase coming Share on Facebook Share on Twitter Treasuries led declines among the safest sovereign bonds after the Federal Bureau of Investigation stuck by its earlier finding that Democrat candidate Hillary Clinton didn’t commit a crime in handling her e-mails as secretary of state, sapping demand for havens with the presidential election just a day away. German 10-year bunds, perceived to be among the safest debt securities in Europe, slid relative to those of Italy and Spain. Treasury two-year notes fell for the first time in seven days amid speculation that a Clinton win is more likely and therefore will open the way for the Federal Reserve to raise interest rates next month. Bond investors joined traders in currency and stock markets in shifting toward riskier assets as Clinton is seen as a continuity candidate, while her Republican rival Donald Trump is viewed as more unpredictable. Trump, a political novice, has advocated winding back free-trade agreements that have been credited by economists for fueling global growth. “There’s a restrained global relief,� said Piet Lammens, head of research at KBC Bank NV in Brussels. “The market reacted to the message that they started the investigation and now they have to do the opposite. However, we are just one day before the election and it would be imprudent to take big positions and think everything is OK.� Treasury 10-year note yields climbed four basis points, or 0.04 percentage point, to 1.82 percent as of 6:03 a.m. in New York, set for the biggest one-day increase since Oct. 27, according to Bloomberg Bond Trader data. The 1.5 percent security due in August 2026 dropped 11/32, or $3.44 per $1,000 face amount, to 97 6/32. Bunds Slip In Europe, the yield on German 10-year bunds climbed two basis points to 0.15 percent, and that on similar-maturity Spanish bonds slid three basis points to 1.24 percent. Treasury yields fell seven basis points last week after the Federal Bureau of Investigation’s James Comey told Congress on Oct. 28 that the organization was examining new e-mails potentially related to its investigation of Clinton’s use of a private computer server. That revelation breathed new life to Trump’s campaign and roiled markets, sparking demand for haven assets. Since then, “the FBI investigative team has been working around the clock to process and review� the material, Comey said in a second letter to members of Congress, dated Sunday. The letter was released by Representative Adam Schiff, a California Democrat. U.S. stock futures jumped with the dollar on the news. Yields on two-year Treasury notes, which are more influenced by the outlook for interest rates than longer maturities, climbed four basis points to 0.83 percent, after falling 10 basis points in the previous six days as opinion polls showed the election tightening. A Labor Department report on Friday showed U.S. wage growth accelerated in October, supporting a view the central bank will raise rates by year-end. Futures contracts show a 76 percent likelihood of an increase by December, compared with 59 percent odds at the end of September. If Clinton wins, “interest rates are likely to head higher as the market looks towards Fed normalization,� said Eugene Leow, a fixed-income strategist at DBS Group Holdings Ltd. in Singapore. “Conversely, sentiment is likely to deteriorate further if Trump wins. We suspect that the knee-jerk reaction lower in yields would be comparable to what was seen in the immediate aftermath of Brexit.�

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