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Morning Edition · Sunday, November 1, 2026Published at 1:14 AM EDT · New York
Two Fed officials voted for a hike while investors moved back into Treasuries before Tuesday's midterms
The 10-year Treasury yield ended October near 4.93%, below 5%, as worries about the US economy's dependence on artificial-intelligence spending outweighed the hawkish dissents.
On October 28 the Federal Reserve held its policy rate at 3.75% to 4.00%. Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, and both wanted a quarter-point increase. Kevin Warsh, the Fed chair, said politics played "no role" in the decision, a week before the midterm vote. He also said the Fed would hold fewer rate-setting meetings starting next year.
Bond investors acted on growth fears more than on the hawkish votes. The Financial Times reported that investors are reducing bets on growth and returning to bonds after a long sell-off, because of concern that the US economy relies too heavily on technology spending. In October an artificial-intelligence (AI) equity basket fell, and the 10-year yield dropped below 5% for the first time in a month. By October 30 the yield was around 4.93%. It had been as high as 5.36% earlier in the year.
The midterms on Tuesday are now the main event for the bond market. In a chart analysis, the FT argued that bond investors may welcome gridlock, because a divided Congress makes large new deficit-financed programs less likely. India's Mint lists the vote alongside purchasing-manager surveys and auto sales as the week's main data for emerging-market investors. A commentary in Nikkei Asia argues that the result will test whether American institutions can correct themselves. Asian allies follow that question because their security and trade policy depend on it.
The two dissents and the bond rally point in opposite directions. Oil rose about 14% in October. Two voting officials now think policy is too loose. At the same time, money managers are buying duration because they expect the AI investment cycle to slow growth.
Part of a tracked trend
Renewed Fed Tightening Fears Rattle Global Markets
Over the next 3-6 months stronger US data revives expectations of Fed rate hikes, driving a firmer dollar, equity selloffs in export-heavy markets, and pressure on hard assets as the IMF warns of recurring economic shocks.
What this means
The Fed's policy rate is below the inflation that the oil shock is producing. Two dissenters now say so on the record. The bond market is betting that slower growth, not Fed tightening, will bring inflation down. From an Austrian view, a slowdown in AI capital spending funded by cheap credit is the correction of earlier malinvestment. A Fed that resists it with easy policy would delay the correction without preventing it. Long-duration holders and indebted technology firms gain if the growth fear proves right. They lose if oil-driven inflation forces the hike the dissenters want. The common view after the bond rally is that rate hikes are no longer a risk. The desk thinks that view underweights the oil premium in the lead story. The likelier outcome is that two-sided pressure keeps 10-year yields swinging around 5% over the next two to three months, rather than trending lower. If a renewed Iran escalation lifts headline inflation, expect more hike dissents at the December meeting. The read is wrong if inflation data released before December show energy costs failing to pass into core prices. That would leave the dissenters isolated.
What to watch
- Whether more voting officials join Cook and Hammack in favoring a hike, which would turn a minority view into a likely policy change.
- Which party controls each chamber after Tuesday's vote, because a divided Congress lowers the odds of new deficit-financed spending that would push long yields up.
- Quarterly capital-spending guidance from the large AI spenders, because cuts would support the growth fear behind the Treasury rally.
Observations to monitor, not financial advice.
Synthesized from: Financial Times Technology · Financial Times Markets · Mint (Economy) · Nikkei Asia
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Comments
1Nov 1, 5:14 AM
Even after the rally, the 10 year yield near 4.93% sits about 93 basis points above the 4.00% top of the policy range, so the curve still slopes upward from the policy rate.