On Monday, USA Vice President Harris received the final support of voters in key states, while participants in the bond market have withdrawn from the "Trump trade" and are no longer betting on rising inflation expectations.

US Treasury prices rose, pushing yields into a flat bull market mode, where the decline in long-term yields exceeded short-term rates. Monday's trend marked a reversal of the bond market sell-off since mid-September, with the market previously partly expecting Trump to win the upcoming election and anticipating a comprehensive Republican victory. The yields on 10-year and 30-year Treasury bonds both fell significantly, marking the biggest decline in one to two months. As of Monday, the 10-year Treasury yield has risen by 68.7 basis points since September 16, while the 30-year Treasury has risen by 55.9 basis points. Bond yields and prices usually move inversely.

Speculators expanded their net short positions in Treasury futures at the end of last month, betting that the 10-year Treasury yield could rise to 4.5%. However, with the bond market strengthening on Monday, these speculators may face losses.

A nationwide poll released by foreign media in Iowa showed Harris leading Trump by a 3 percentage point advantage - an unexpected result, as Iowa has turned right in recent elections. This result may indicate that Harris' performance in critical battleground states such as Wisconsin, Michigan, and Pennsylvania may be better than expected.

The latest national and swing state polling results show a very close race. The national polling average by RealClearPolitics shows Trump and Harris tied at 48.5% each.

On Monday, the 10-year Treasury yield briefly dropped by about 10 basis points to a intraday low of 4.26%. Lawrence Gillum, Chief Fixed Income Strategist at lpl financial, stated, 'This is a significant fluctuation that will impact market positions, partly due to short covering.' He also pointed out that to completely clear out all speculators' net short positions, the yield needs to continue to decline, which has not yet been fully cleared.

According to statistics from Brian Lutz, research assistant at deutsche bank, as of October 29, speculators' net short positions in 10-year futures contracts increased by 57,000 contracts. The chart below shows speculators' net short positions in various types of Treasury futures, with a zero-reading line dividing.

LPL's Gillum said on the phone that it's difficult to distinguish Monday's bond market trend from other possible catalysts, such as the recent strong performance of US economic data and the upcoming policy statement by the Federal Reserve. The market generally expects the Fed to announce a 25 basis point rate cut on Thursday.

Gillum added, "We are in a high volatility environment, which undoubtedly also affects position adjustments."

In fact, the widely watched ICE BofAML MOVE Index (reflecting expected volatility in the US Treasury market) has soared to one of the highest levels in the past year. At the same time, the ICE US dollar index fell by 0.4%.

Stephen Innes, a partner at SPI Asset Management in Bangkok, pointed out, "A series of weekend polls has intensified the showdown between Harris and Trump, with the tight race leaving everyone breathless."

"This evenly matched election may prompt heavyweight players on Wall Street to quickly make strategic adjustments, just as swiftly as saying 'rate cut'." He wrote in a weekend report that as the dollar and bond yields begin to slow due to the tight race, the market seems to be taking a "collective deep breath."

Editor/Lambor