---
title: The Results Are In
description: An in-depth review of the recent economic trends and potential challenges ahead. Explore the steepening Treasury curve, inflation concerns, municipal bond market dynamics, and the impact of political events on the economy. Gain valuable insights into what could go wrong and how it may affect your investments. Stay informed with City Different Investments.
---

[City Different Investments Blog](https://blog.citydifferentinvestments.com)

# [The Results Are In](https://blog.citydifferentinvestments.com/the-results-are-in)

 Written by [City Different Investments](https://blog.citydifferentinvestments.com/author/city-different-investments) | Nov 9, 2026, 4:37:50 PM

## WEEK ENDING 11/06/2026

- - Market implications of the midterms
    - Deep dive into AI and Energy

## A CITY DIFFERENT TAKE

Democrats won control of Congress this week, but we don’t expect the election to change the near-term rate outlook. Our focus is on the debt ceiling, tariffs, the Fed, and Treasury supply.

**Government funding:** Funding expires December 11, and the likely outcome is a stopgap into February or March. That alone should have little effect on rates. Next year is likely to bring more brinkmanship and a higher risk of shutdown, though a shutdown would not stop Treasury from borrowing. The debt ceiling is the bigger risk. The deadline could arrive between mid-2027 and fall 2027 or later. Each side may believe the other will fold, which raises the risk of a policy mistake. We are watching Treasury bills that mature near any potential deadline.

**Tariffs:** Tariff policy remains in the White House’s hands. Congress may want to reclaim trade authority, but we do not expect a veto-proof majority. The key question is whether the President pivots or doubles down.

**Inflation and growth:** Roughly three quarters of the tariff pass-through may be behind us. The effective tariff rate is in the high single digits, and a move to the low double digits would add inflation pressure. Energy matters even more. Fuel prices are central to the affordability squeeze, and they depend more on diplomacy than on the Fed. On growth, tax refunds and lower taxes provided support this year. Medicaid and SNAP restrictions are set to bring modest restraint next year unless they are negotiated away.

**The Fed:** We think the Fed is serious about inflation, and the election makes it easier to act that way. Any vacancy now requires a nominee who can win 51 votes in a Democratic Senate. Chair Warsh also shares the committee with 11 other voters, and no chair can set policy alone. Governor Powell’s seat is the only one scheduled to expire in the next two years, and Governor Cook’s case remains unresolved. Even so, a Democratic Senate limits who could replace either of them. That reduces the risk of a politically aligned Fed and supports the long end.

The dual mandate also appears less conflicted than it did earlier this year, giving the Fed more room to respond. Rate hikes cannot fix an oil supply shock, however. The test is whether higher energy and tariff costs feed into broader inflation. We respect the risk of a more hawkish Fed.

**AI:** The midterms did not end the AI buildout, but they did change the credit math. Delays and higher costs now matter more, and bondholders should separate the companies that can absorb them from those that cannot.

**What changed:** Democrats won governorships in Texas, Georgia, and Ohio, all major data center markets. Texas has the largest pipeline, and more than half of it is in early stages, often led by first-time developers. Voters also moved against the buildout locally. Of the 46 data center measures, 40 were approved or trending toward tighter restrictions. We should expect greater delays, more scrutiny, permitting issues, and higher costs.

**Who is most exposed:** Leveraged developers and neoclouds face the greatest risk. They rely on outside financing and on delivering capacity on time. If projects slip, revenue is delayed while interest continues to accrue. CoreWeave’s 9.625% bonds due 2032 reached a 15% yield as of October 14, showing how little room for error the market may allow. Force majeure clauses also deserve closer attention after Oracle’s recent invocation helped push its CDS sharply wider.

**Who may hold up better:** Large hyperscalers with existing facilities and secured power may gain pricing power if new capacity is constrained. Their balance sheets can better absorb regulatory and power costs. A slower buildout could also reduce future bond supply. Still, quality varies.

**What it means for municipal credit:** The fight is local, so public power and utility credits need closer review. We would focus on who pays for grid investment, how much load data centers account for, and what happens if projects are delayed or canceled.

**The Fed is the wild card:** Tighter financial conditions could make policymakers more patient, but inflation risks remain. We would not assume the Fed will rescue the AI trade.

**Rates:** AI-related issuance tripled this year and could rise another 50% next year. Even so, we do not see clear evidence that it is crowding out Treasuries. This year’s rate moves mostly reflected changing Fed expectations. With next year’s deficit projected near $2 trillion, the bigger issue is Treasury’s long-term debt supply in the second half of 2027.

Our takeaway: Expect noise from Washington, but stay focused on the debt ceiling, tariffs, the Fed, and Treasury supply. Those are the issues most likely to move fixed income markets.

**Energy:** For Fixed Income, inflation is the demon we grapple with. In a year where energy costs have surged by 57%, energy and inflation were a crucial factor in the elections. The underlying geopolitics behind energy costs remain. US-led strikes on Iran disrupted seaborne flows through the Persian Gulf. Drone attacks on Russian refineries have tightened distillate and gasoline supplies. Renewed fighting between Houthi forces and Saudi Arabia adds another front.

Oil markets remain nervous, with implied volatility running near double its three-year average. Traders are still pricing in the risk of further escalation, including renewed strikes on Iranian infrastructure.

Trump does not need Congress to pursue diplomacy. The key question is whether the White House has a credible plan to lower energy costs by helping resolve these conflicts. A lasting agreement could require concessions or temporary supply disruptions, so prices could rise before they fall. After an election focused on affordability, that would be a difficult tradeoff.

The rewards could be substantial. Durable ceasefires would strengthen Trump’s foreign policy legacy and ease the affordability pressure on Republicans heading into 2028.

Markets are skeptical. They imply less than a 15% chance of a deal with Iran by year-end and less than a 10% chance of a ceasefire between Russia and Ukraine before 2027.

 THE TREASURY MARKET

Treasuries rallied after the Democratic sweep. Brent closed nearly 9% lower, below $95, and Treasuries rallied on expectations of lower inflation pressure, lower government borrowing, and potentially softer growth. A tech rout on Thursday drove a sell-off, with yields stabilizing on Friday after the jobs report showed October payrolls rose by 165,000.

**The 2s10s spread is 34.4 bp, up a modest 2.6 bp from 31.8 bp a week ago.** **10s20s is steepest at 43.9 bp**, or about 4.4 bp per year of maturity. 5s10s is close behind at 21.2 bp, about 4.2 bp per year, and **20s30s is inverted by 3.0 bp**.

 THE CORPORATE MARKET

 IG yields fell less than Treasuries at the front end: the 2-year was down 5.4 bp versus 8.2 bp for Treasuries. **IG 2s10s is 78.0 bp as of 11/06, up just 0.1 bp from 77.9 bp on 11/02.** That’s about 2.3 times the Treasury 2s10s spread of 34.4 bp. 

 THE MUNICIPAL MARKET

The 2s10s spread is 62.0 bp, and the curve flattened 2.3 bp as the 10-year led the rally.

**Steepest part of the curve: 10s20s.** Munis inside 5 years look expensive relative to Treasuries right now.

 THIS WEEK IN WASHINGTON

 Since we covered most of the Washington news in the City Different Take, here is a quick recap.  

- Democrats won both the House and the Senate, setting up divided government for the rest of President Trump’s term.
- Government funding expires December 11, and we expect a stopgap into February or March. Shutdown risk rises next year, though a shutdown would not stop Treasury borrowing.
- In our view, the debt ceiling is the bigger risk. The deadline could fall between mid-2027 and fall 2027 or later, and we are watching Treasury bills that mature near it.
- Tariff policy and energy diplomacy stay with the White House, since we do not expect Congress to have a veto-proof majority to reclaim trade authority.
- Medicaid and SNAP restrictions are set to slow growth modestly next year unless they are negotiated away.
- Fed nominees now need 51 votes in a Democratic Senate, which we believe lowers the odds of a politically aligned Fed.

## CONCLUSION

The midterms changed who holds power in Washington, but they did not change the main questions facing fixed income investors. Inflation remains the common thread. Energy and tariffs will help determine the Fed’s path, while the debt ceiling and Treasury supply will shape the rate market. AI has become a credit story in which delays and higher costs will separate strong balance sheets from weaker ones.

We expect more political noise in the months ahead, but we do not plan to invest in response to the headlines. We will stay focused on inflation, liquidity, and credit quality. That means watching Treasury bills near any debt ceiling deadline, favoring issuers that can absorb higher costs, and carefully underwriting AI-linked and public power exposure. In this environment, discipline and selectivity matter more than predicting Washington's next move.

 

IMPORTANT DISCLOSURES  
*The information and statistics contained in this report have been obtained from sources we believe to be reliable but cannot be guaranteed. Any projections, market outlooks or estimates presented herein are forward-looking statements and are based upon certain assumptions. Other events that were not taken into account may occur and may significantly affect the returns or performance of these investments. Any projections, outlooks or assumptions should not be construed to be indicative of the actual events which will occur. These projections, market outlooks or estimates are subject to change without notice.*

*Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product or any non-investment related content, made reference to directly or indirectly herein will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.*

*All indexes are unmanaged, and you cannot invest directly in an index. Index returns do not include fees or expenses. Actual portfolio returns may vary due to the timing of portfolio inception and/or investor-imposed restrictions or guidelines. Actual investor portfolio returns would be reduced by any applicable investment advisory fees and other expenses incurred in the management of an advisory account.*

*You should not assume that any discussion or information contained herein serves as the receipt of, or as a substitute for, personalized investment advice from City Different Investments. To the extent that a reader has any questions regarding the applicability above to his/her individual situation or any specific issue discussed, he/she is encouraged to consult with the professional advisor of his/her choosing. City Different Investments is neither a law firm nor a certified public accounting firm and no portion of this content should be construed as legal or accounting advice.*

*A copy of City Different Investments' current written disclosure statement discussing our advisory services and fees is available for review upon request.*

*Unless otherwise noted, City Different Investments is the source of information presented herein.*

*A description of the indices mentioned herein is available upon request.*

[View full post](https://blog.citydifferentinvestments.com/the-results-are-in)

```json
{
  "@context" : "http://schema.org",
  "@type" : "BlogPosting",
  "author" : {
    "@type" : "Person",
    "name" : "City Different Investments"
  },
  "dateModified" : "2026-11-09T16:37:50.153Z",
  "datePublished" : "2026-11-09T16:37:50Z",
  "headline" : "The Results Are In",
  "image" : {
    "@type" : "ImageObject",
    "height" : 628,
    "url" : "https://19807137.fs1.hubspotusercontent-na1.net/hubfs/19807137/Income%20Week%20And%20Review%20-%202026-11-09T093707.269.png",
    "width" : 1200
  },
  "mainEntityOfPage" : "https://blog.citydifferentinvestments.com/the-results-are-in",
  "publisher" : {
    "@type" : "Organization",
    "logo" : {
      "@type" : "ImageObject",
      "height" : 60,
      "url" : "/hs/hsstatic/content_shared_assets/static-1.4092/img/default-amp-logo.png",
      "width" : 60
    },
    "name" : "Insights Blog"
  }
}
```