All the anxiety sent investors to the relative safety of the Japanese yen, the Swiss franc and gold, while extending a rout in Mexico’s peso which is seen as a barometer for market perception on the US vote.
A measure of expectations for market volatility surged more than 50% in six days as Democratic contender Hillary Clinton has seen her odds of a US election victory falter after the FBI reopened a probe into an unauthorised email server.
In an open letter, economists including some Nobel laureates warned the Republican is “a dangerous, destructive choice” as he “promotes magical thinking and conspiracy theories”.
“Trump’s victory could lead to volatility, flight to safety and selloffs in stocks. We still think Clinton will win, and it will be business as usual, but it has become a very tight race,” said Soeren Moerch, head of fixed income trading at Danske Bank in Copenhagen.
Ms Clinton holds a slim advantage with independents, with almost half the voters in the crucial bloc saying renewed scrutiny of her email won’t impact their vote.
Likely voters who don’t identify with either party represented 29% of the electorate in the last presidential election and now back Ms Clinton over Mr Trump 39% to 35% in a head-to-head contest, the latest Purple Slice online poll for Bloomberg Politics showed.
Investors seeking safety boosted sovereign bonds, with 10-year yields falling across most of the developed world.
Ahead of today’s auction by the National Treasury Management Agency, Irish 10-year bonds underperformed those of Germany, but still fell slightly to 0.64%, as money came out of equities and into bonds, amid the uncertainty of the US presidential race, said Ryan McGrath, senior trader at Cantor Fitzgerald Ireland.
The yield on US Treasuries due in a decade fell three basis points to 1.8% at on stage yesterday. Yields on German 10-year bunds, the eurozone’s benchmark securities, headed for their biggest drop in almost six weeks, slipping five basis points to 0.13%.
Yields on similar-maturity UK gilts dropped nine basis points to 1.19%, and those on Spanish 10-year debt fell nine basis points to 1.2%.
While the peso has fallen in five of the past six days, it is still about 3% stronger than a record low in September, indicating investors are factoring in a lower chance of a Mr Trump victory.