Washington and the Bond Market

Includes: AGG, IEF
by: TickerSense

While there has been no shortage of commentary regarding the impact of the election on the stock market, the impact on bonds has been less talked about. In the chart of the yield on the Ten-Year Treasury below, we have color coded periods based on the political makeup of Washington at the time.

As the chart summarizes, Democratic control of the Oval Office and both houses of Congress has been the most frequent makeup in Washington (occurring three different times), and during all three of those periods, interest rates rose. The periods with no shading represent times when we had a Republican President and Democrats in control of both houses of Congress. The direction of bonds during these periods was mixed. In the 1969-1977 time period, the yield on the ten-year increased 77 bps from 6.04% to 6.81%. From 1987-1992 however, interest rates declined 45 bps from 7.13% to 6.68%.

ten year yield