SMBC: US Midterm Elections Have Limited Impact on Treasuries; a Democratic Sweep Could Push Rates Higher

October 28: Sumitomo Mitsui Banking Corporation (SMBC) said in a report that the different outcomes of the November 3 US midterm elections will have limited impact on interest rate markets, but if Democrats control both the Senate and the House at the same time, they could push US Treasury yields slightly higher by expanding healthcare spending. The report estimates that if Democratic healthcare policies are fully implemented, spending could increase by $1.5 trillion over the next 10 years; restoring Affordable Care Act (ACA) subsidies would cost about $80 billion over three years and $350 billion over ten years. If Congress is divided between the two parties, major tax and spending adjustments are expected to be difficult to advance, and tariff policy is also unlikely to be directly overturned by Congress. Another risk worth watching is AI data centers: local governments may tighten construction restrictions or cancel preferential tax policies, slowing some AI investment, but SMBC believes the impact on overall economic growth and the Federal Reserve's policy path may be limited. The report also expects that the US Treasury is unlikely to reach the debt ceiling before autumn 2027, and that related negotiations may be delayed until early 2028.