AFS Markets Blog: Midday 03/11/2026

• Meanwhile in markets, US Treasuries are moving sideways ahead of the US midterms. There is a bit more action in equities, where AI worries are dragging indices back into the red;

• All eyes may be on the US midterms today, but on this side of the Atlantic we won’t see any results until we wake up tomorrow morning. That is, unless you plan to stay up until at least 01:00 CET for the first exit polls in competitive states – and even then, finalized vote counts could take weeks. Still, we can be confident about the outcome: a commanding Democratic victory in the House. While the Senate race is expected to be a tighter affair, the Dems are set to win there too;

• Polymarket punters now price in a 77 percent probability of a Democratic Senate majority – the highest level on record – and we can’t blame them. The latest batch of New York Times/Siena polls – widely viewed as the gold standard – illustrates why. Democrats lead in all seven of the most competitive battleground states, of which they need to win four for control. While their advantage is razor-thin for two contests – Iowa and Alaska – their leads in the remaining five – Kansas, Ohio, Maine, Texas and Michigan – are five percentage points or wider. Deep down in Texas, the lead of Democratic candidate James Talarico has even stretched beyond the margin of error, highlighting just how large a polling miss would be needed for a Republican upset;

• The day after the midterms traditionally fires the starting gun for the 2028 presidential cycle. But there is a far more pressing issue to keep an eye on: the December 11th US funding deadline. If Congress cannot agree on government funding by then, the federal government will shut down;

• Resolving the standoff will fall to the current (lame-duck) Congress. Even with a Republican majority – and assuming zero defections – the simplest solution of passing a continuing resolution requires at least seven Democratic votes in the Senate to pass. Nevertheless, I think this is the most likely outcome. However, if President Trump reacts aggressively to the midterms and lashes out – some speculate Trump could seek to replace a Supreme Court justice while Republicans still hold a Senate majority – Democrats could respond by using their leverage to force a government shutdown;

• Shifting to Switzerland, October headline inflation came in much hotter than expected, at 1.5 percent YoY versus the 1.2 percent consensus. The increase in inflation remains a story of the energy shock: excluding petroleum products – which account for a mere two percent of the CPI basket – inflation falls to 0.6 percent YoY. Somewhat reassuringly, core inflation (excluding seasonal and energy products) held steady at 0.5 percent YoY;

• Nevertheless, the print has revived discussion around potential SNB rate hikes, and fairly so, given that the SNB’s latest conditional inflation forecast puts average inflation in Q4 at 1.2 percent YoY. Pricing for December remains relatively subdued: SARON swaps now price in 3bps of hikes, after a move had been fully priced out before the data drop. The March 2027 meeting is now pricing in 18bps of hikes, up from 15bps yesterday but down from a peak of 20bps this morning;

• Despite this repricing, my base case remains that the SNB will not hike in or before March. Safe-haven demand for the franc could pick up ahead of the French Presidential elections in April and May, adding to the disinflationary pressure while core inflation remains towards the lower end of the SNB’s target range. Still, I will certainly be running the numbers again for a potential hike at the June meeting following the latest data;

• Touching on broader market commentary, the Stoxx 50 is down half a percent this morning, with the technology subindex taking a leading role among the losers. Our own AI index, comprising hyperscalers and major chip producers, is down one percent and trading at its lowest level since July. Moving to energy markets, Brent crude is up one percent this morning, trading at $105 a barrel. Eyes remain on the negotiating table, with Brent crude still 10 percent below last week’s close. The latest reports are that both the US and Iran are studying the most recent ceasefire proposals, though report make clear a gap remains between the two parties;

• Looking ahead, besides the US midterms, we have plenty of ECB-speak on tap this afternoon, alongside the release of detailed US job openings data for September. Tomorrow, we’ll delve into the preliminary midterm results, but there is plenty more on the calendar. That includes the Eurozone CPI release, the US Treasury’s quarterly refunding announcement (outlining its borrowing needs), the Swedish Riksbank’s interest rate decision (with a 25bps hike the consensus) and the US ISM services PMI.

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