Treasury yields tick lower as investors brace for midterms

Treasury yields were slightly lower in early Monday trading, after a sharp climb last week, as investors geared up for a week that includes midterm elections that could see Republicans cede control of the House, as well as a Federal Reserve policy meeting.

The 10-year Treasury note yield

                            
                            
                                  
      
      
      
      
      
      
      
      
      
                            
                                     TMUBMUSD10Y, + 1.82%

was down 0.7 basis point to 3.207%, the 2-year note yield

                            
                            
                                  
      
      
      
      
      
      
      
      
      
                            
                                     TMUBMUSD02Y, -0.70%

decreased 0.9 basis points to 2.903%. The 30-year bond yield

                            
                            
                                  
      
      
      
      
      
      
      
      
      
                            
                                     TMUBMUSD30Y, + 1.81%

traded flat at 3,453%, around its highest levels in more than four years. Bond prices move in the opposite direction of yields.

Investors are preparing for the midterm as analysts anticipate a split Congress with the Democrats taking over the House, leaving the Senate to Republicans. This potential for political gridlock has split Wall Street as market participants debate whether a legislative impasse would be benign for risk assets.

See : Stock-market bulls hope midterms revive upside momentum

But investors say the more material concern is continued trade tensions between the U.S. and China. Optimism for progress on the trade front rose Friday after President Donald Trump said he was making a headway in negotiations, comments that came after his chief economic adviser, Larry Kudlow, said the White House was not on the cusp of a deal in an interview with CNBC.

Read: Evidence that US-China trade talks are the largest catalyst for the stock market

"Regardless of who takes the House, I do not expect any legislation of substance in the next two years that would matter for markets and the economy. The administration got what it wanted in the tax bill. Maybe the most relevant in the short term, the results could determine the negotiating position of the Administration with China in the eyes of both Trump and Xi, "wrote Peter Boockvar, chief market analyst for the Bleakley Advisory Group.

New York Fed President John Williams is set to speak at 8:30 a.m. Eastern, followed by Dallas, President Robert Kaplan at 7 p.m. This coming ahead of the Federal Open Market Committee's meeting from Wednesday to Thursday, with analysts expecting the policy-making group to stand pat until December.

On the data front, the Institute for Supply Management's services gauge has been slated to come out at 10 am Economists surveyed by MarketWatch anticipated a reading of 58.6% in October, falling from 61.6% the previous month.

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