US Rates Bear Steepening as Markets Price in US Election Biden Sweep


US Rates, JPY Analysis & News

  • President Trump Pulls Plug on Stimulus Talks
  • Markets Gearing Towards a Democrat Sweep
  • Japanese Yen Feeling the Pressure from Rising Yields

President Trump Pulls Plug on Stimulus Talks

Late in the US session, US President Trump had pulled the plug on stimulus talks sending the equity markets lower, while prompting a bid in the greenback, confirming my expectation that a pre-election stimulus package would not be agreed. However, while this is a negative for risk appetite in light of recent optimism on fiscal stimulus, markets may still remain optimistic on the back of rising expectations of a democrat sweep at next month’s election. This has been signalled in the bond market with treasuries seeing a significant bear steepening this week with the 30yr trading above its 200DMA for the first time since Q1 2019 as a blue wave means more stimulus going forward.

Markets Gearing Towards a Democrat Sweep

Source: Refinitiv

Japanese Yen Feeling the Pressure from Rising Yields

Across the FX space, the rise in US yields has weighed on the Japanese Yen with USD/JPY reclaiming the 106 handle with cross-JPY also bid. While the Japanese Yen may be the ideal hedge for US election uncertainty, if you believe in the polls, the likelihood of a contested election has been reduced. As such, the absence of such a scenario could see equities supported and subsequently prompt outflows in the Japanese Yen.

JPY Forecast

JPY Forecast

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In the short-term, however, uncertainty will continue to linger ahead of the election, thus further upside in USD/JPY may be limited, although a halt in rising bond yields is needed. Resistance is situated at 106.20-30 with 106.53 (100DMA) above, on the downside, support resides at 105.77 (50DMA) with 105.60-65 below.



of clients are net long.



of clients are net short.

Change in Longs Shorts OI
Daily 7% -21% -8%
Weekly 1% 10% 5%

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