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Today is the day of midterm elections. Fiscal spending is the big topic in this election cycle. For those interested, below is a table of historical midterm election results, along with the annual changes of the federal fiscal deficits and the annual changes of 10 year T-note following the election years since 1962.

When Democrats control the House or the Senate, the growth rate of deficits is much higher than that under Congress controlled by Republicans. However, if we remove the Nixon (Republican President) years from the sample, the average growth rate of deficits under Congress controlled by Democrats is negative after the midterm elections. After the Nixon years are removed, if the result of the midterm election is that the same party (no matter which party) controls both Congress and the presidency, then the growth rate of the deficits is higher than that when different parties control different branches of the government.

If Republicans control the House or the Senate or both, on average, the yield of the 10 year T-note drops more than the T-note yield when Democrats take control of Congress in the years following the midterm elections. If the same party controls both Congress and the presidency, then the T-note yield will rise. If different parties take the presidency and Congress, the T-note yield is going to decline in the following year.

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Source: Historical Impact of Midterm Elections on Bond Yields