The 10-year Treasury yield was last up 1.2 basis points at 4.848%, according to Tradeweb, and the DXY dollar index reached a one-week high of 102.046. Earlier, German yields fell to session lows: the 10-year Bund reached 3.208%, its lowest since late August; the 30-year yield hit 3.608%, its lowest since the end of July; and the two-year yield touched 2.916%, its lowest since the end of August. They later moved slightly above those levels but remained lower on the day. The 10-year U.K. gilt yield also reversed earlier losses, rising 1.3 basis points to 5.156%.

Bond investors have welcomed the prospect of political gridlock, which could curb fiscal spending under a Republican presidency and Democratic Congress. Safe-haven demand also grew as Asian technology shares sold off amid expectations of tighter AI regulation, though Nasdaq futures began to recover. Julius Baer fixed-income analyst Afonso Borges said the fall in Treasury yields during the AI-led selloff supported the firm’s view that policy-rate expectations, rather than issuance, are the main cyclical driver. KBC Bank analysts said Democratic oversight left the AI trade facing substantial uncertainty.

Markets are reassessing how much interest-rate pressure the U.S. economy can sustain, Borges said. Money markets price in 42 basis points of Federal Reserve rate hikes over the next 12 months, according to LSEG. October payrolls, due at 1330 GMT, could shift those expectations. The Wall Street Journal poll’s consensus forecast is for 59,000 new jobs, compared with 29,000 in September.

Capital.com analyst Daniela Hathorn said stronger payrolls, especially alongside firm wage growth, could bolster expectations of further Fed tightening and push Treasury yields and the dollar higher. Weaker hiring could ease rate expectations, but a deeply disappointing report might heighten concerns about the economic outlook. Investors are also monitoring developments in the Middle East and energy prices. Kudo.com’s Konstantinos Chrysikos said escalation could increase safe-haven demand, while a deal reopening Hormuz could lower oil prices and inflation fears.