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US Treasury yields dipped on Friday as investors wait on key employment data next week for fresh clues on the likely path of Federal Reserve interest rate cuts and the result of next month’s US elections.

Ten-year yields reached a three-month high on Wednesday as traders price in a less dovish Federal Reserve, following a much stronger than expected jobs report for September and other solid economic releases.

“The 10-year Treasury yields don’t have a good reason to gap lower here,” said Padhraic Garvey, regional head of research, Americas at ING in New York, noting “reasonably robust data that’s not exactly collapsing.”

Soft jobs data going forward, however, could be the impetus for yields to turn back lower, Garvey said. Next Friday’s jobs report for October is expected to show that employers added 125,000 jobs during the month, according to economists polled by Reuters.

Traders are now pricing in 76.6% odds of 25 basis point cuts at both the Fed’s November and December meetings, according to the CME Group’s FedWatch Tool.

India bond yields dip on value-buying, lower state debt supply

Benchmark 10-year note yields were last down 1.6 basis points at 4.186% after reaching 4.26% on Wednesday, the highest since July 26. US two-year yields, which track rate move expectations, fell 2.2 basis points to 4.045%.

The yield curve between two-year and 10-year yields steepened by around a basis point to 14 basis points.

Yields have also moved higher this week as betting markets including Polymarket show greater odds that Donald Trump will win the US presidency at the Nov. 5 US elections, along with a possible Republican majority in the Senate and House of Representatives.

The US budget deficit is expected to worsen under a presidency of either Trump or Vice President Kamala Harris and an increase in government spending would likely lead to more Treasury issuance.

Trump’s policies on tariffs and illegal immigration are also expected be inflationary. Longer term, concerns about the deficit and rising Treasury supply is likely to weigh on bonds.

“I do feel there’s a mood in the marketplace now that once we’ve had that election results, what about the deficits? What’s the plan there? Because it can’t be left to its own devices,” said Garvey.

The US Treasury is also due to give its updated borrowing estimates for the coming two quarters next week.

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