US midterm election results: Impact of Trump's loss on bond yields in India, overseas markets; experts weigh in

The US midterm election results have impacted global bond markets, with Indian government bond yields declining sharply. The Democratic Party's victories in both chambers of Congress have dealt a major setback to US President Donald Trump and his Republican Party.

According to Bloomberg at 9:04 am on 5 November, the benchmark Nifty 50 Index surged as much as 2%, taking its weekly gains close to 6% and putting it on course for its best weekly performance since 2021.

Benchmark Indian bond yields dropped as much as 12 basis points to 7.07%, extending the weekly decline to about 35 basis points. The rupee strengthened as much as 0.3% to 94.3250 against the US dollar.

Here is what experts say about the bond market outlook and what Indian investors should consider doing.

According to the latest market data available on TradingView as of 11:50 am, the current 10-year government bond yields are as follows:

• India: 7.090%, down 1.42%
• US: 4.847%, down 0.88%.
• Japan: 2.760%, down 2.09%

Nishchay Nath, Founder & CEO, BondScanner, said bond yields are falling as markets reassess two key risks: elevated oil prices and US government borrowing. Investors expect slower growth in US government borrowing following the US midterm election results, which has reduced the premium they demand on long-term Treasuries.

As a result, the 10-year Treasury yield has eased to around 4.9%, after crossing 5% last month. For India, the fall in oil prices matters most, as it eases inflation concerns and supports the rupee. The 10-year government security yield has fallen to around 7.1%, from close to 7.5% less than two weeks ago, he added.

Anand K Rathi, Co-Founder of MIRA Money, said lower crude prices, improved currency sentiment and short-covering in government bonds also contributed to the decline. The movement in Japanese yields is part of the broader global bond rally, although domestic monetary policy and inflation expectations remain important drivers there as well.

Amit Modani, Senior Fund Manager & Lead Fixed Income, Shriram AMC, said the US 10-year Treasury yield is effectively the world’s benchmark interest rate. When it moves, borrowing costs elsewhere tend to follow.

• United States: A divided government makes large tax cuts and new spending harder to pass. Smaller deficits mean less government borrowing and fewer bonds issued. Fewer bonds for sale means higher prices, and higher prices mean lower yields. Investors also bought Treasuries as a safe haven while stocks fell. However, the Democrats lack a filibuster-proof Senate majority, and the President retains veto power, limiting the scope for near-term policy changes.
• India: The impact comes through two channels. The bigger one is oil. India imports most of its crude, so cheaper oil means lower inflation, a smaller import bill and a stronger rupee, all of which push bond yields down. The second channel is US yields. When US bonds pay less, Indian government bonds yielding around 7% look more attractive to foreign investors, and a weaker dollar supports the rupee.
• Japan: The effect is more mixed. Falling Treasury yields and cheaper oil pull Japanese yields lower, and safe-haven demand has strengthened the yen. Pushing the other way, minutes from the Bank of Japan’s September meeting reinforced expectations of further rate hikes, which limits how far Japanese yields can fall.

Rathi said that since bond prices move inversely to yields, the recent drop in yields is good for Indian bond investors. As yields fall, people who already own longer-term bonds may benefit from capital gains.

Modani said existing holders have benefited. When yields fall, bond prices rise. Long-duration and gilt funds gain the most, so their NAVs should have risen over the past few sessions.

Investors with a lower risk appetite may consider short-duration funds, which are generally less sensitive to interest rate movements. Those willing to take on higher risks and with a longer investment horizon may consider long-duration funds, which could benefit more from a further decline in bond yields, Rathi suggested.

“No major change in strategy is needed. Investors should stay invested, focus on quality and accrual, and avoid chasing duration after this rally,” Modani suggested.

Nath said the recent fall in yields reflects expectations of lower oil prices more than any change in actual oil supply. Yields could move higher again if crude prices rise. The RBI raised the repo rate to 5.5% last month and moved to a calibrated tightening stance, making its December policy review significant for the direction of yields.

Modani said bond yields are likely to remain volatile in the near term. Rathi added that the direction will depend on how much oil prices rise or fall, how much inflation there is in the country, the RBI policy, the amount of money the government needs to borrow, and how US Treasury yields change.

Sheetal Goel is a Content Producer at Livemint, where she covers corporate developments, personal finance, business trends, markets, and SEBI-related updates. She focuses on simplifying complex financial concepts and presenting them in a clear, reader-friendly manner, thereby helping audiences better understand investment trends, personal finance, and market developments. Her writing focuses on making finance more accessible to everyday readers while maintaining clarity, accuracy, and relevance. <br><br> She holds a degree in Economics (Hons.) along with an MBA in Finance, which has helped her develop a strong foundation in financial analysis, market understanding, and business reporting. Before joining journalism, she worked with finance and broking firms, where she closely followed market developments, investment strategies, and evolving industry trends. This practical exposure strengthened her understanding of financial markets. She has also written content across multiple formats and platforms, including YouTube, LinkedIn, and Instagram. <br><br> Over time, she has developed expertise in covering market-linked stories, investor-focused topics, and regulatory updates in a simplified yet informative style. She also enjoys reading and listening to Hindi poetry, reflecting her appreciation for literature and creative expression beyond the world of markets and numbers.

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