US government bond sell-off continues after Democrats win control of Senate

European equities rose for a second day, while Asian markets rallied, as violent clashes in Washington failed to shake hopes for increased fiscal stimulus in the US.
The benchmark Stoxx Europe 600 index rose 0.3 per cent in early trading on Thursday, as did Germany’s Xetra Dax, while London’s FTSE 100 crept 0.1 per cent higher.
This followed a rally on Wall Street on Wednesday, led by small-cap stocks and economically sensitive sectors, after Democratic victories were confirmed in Georgia’s run-off elections, handing the party control of the US Senate and clearing the way for the administration of president-elect Joe Biden to enact large-scale spending measures.
The positive mood continued in the Asia session, with Japan’s Topix index closing 1.7 per cent higher and Australia’s S&P/ASX 200 ending the day up 1.6 per cent. South Korea’s Kospi added 2.2 per cent while China’s CSI 300 gained 1.8 per cent.
US stock futures also rose, as investors shrugged off events in Washington, where angry mobs of Donald Trump supporters interrupted Congress’s certification of Mr Biden’s election victory, forcing legislators to abandon the US Capitol building before reconvening later in the evening.
The S&P 500 was set to climb 0.5 per cent at open while the Nasdaq 100 index was poised to gain 0.4 per cent.
“We believe the [election] results offer somewhat of a best-case scenario,” said Ralph Giacobbe, analyst at Citigroup. He added that a Democratic majority in the Senate was likely to spur more stimulus spending, including support for state budgets under pressure from the coronavirus pandemic.
The prospect of more US stimulus has prompted investors to bet on the Biden administration fuelling economic growth but also inflation. The yields on US government bonds — which this week breached 1 per cent for the first time since the start of the coronavirus crisis — rose a further 0.02 percentage points to 1.06 per cent as investors sold out of the debt.
In another sign investors were looking beyond the attempted threat to the peaceful transfer of power in Washington, the price of gold — a commonly used haven asset — was steady at $1,919.
The dollar, as measured against a basket of currencies, was broadly flat. The US currency has fallen 7 per cent in the past 12 months, pushed down by expectations of higher US borrowing and the central bank keeping monetary policy loose to support the economy through the pandemic.
Brent crude was 0.5 per cent higher at above $54 a barrel.