By Rachel Rosenthal

HONG KONG -- Investors sold global government bonds in thin trading early Wednesday, as the first polls closed on Election Day and initial results showed Democratic candidate Hillary Clinton leading in some key states.

Yields on U.S. Treasurys were last trading at 1.869%, after closing at a five-month high, compared with 1.857% late Tuesday, according to Thomson Reuters. Bond prices have slipped in recent days as markets see a greater chance for a Clinton victory, pushing investors out of government bonds. Yields rise as prices fall.

Yields on benchmark 10-yeargovernment bonds in Australia and New Zealand meanwhile rose slightly, following the lead from U.S. Treasurys overnight. Investors are hesitant to place any big bets before more results start to filter in.

"Liquidity is thin," said Thomas Reich, head of G-10 rates trading at Citigroup Inc. in Tokyo. "Clients are in no man's land right now...People are sitting there and watching the screens. As trends clarify, people will jump in."

Traders will be watching results from Florida, an important battleground state. As the first polls close in the U.S., Republican candidate Donald Trump has won Indiana and Kentucky, and Mrs. Clinton took Vermont.

Yields on New Zealand's benchmark 10-year bond were last at 2.830%, a six-month high, compared with 2.810% late Tuesday, according to Thomson Reuters. Yields on Australia's 10-year government bond rose to 2.394% compared with 2.361% a day earlier. Yields on Japan's 10-year government bond areroughly flat.

Mrs. Clinton is widely perceived by markets as a known quantity. In recent days, evidence appearing to boost her chances of victory has encouraged buying of riskier assets, like stocks, and selling of safer assets, like bonds and gold. The S&P 500 notched its biggest daily gain since March on Monday, ending its longest losing streak in more than three decades, after the Federal Bureau of Investigation said it found no new evidence to warrant charges against Mrs. Clinton related to her use of a private email server. The benchmark ended up 0.4% on Tuesday.

Donald Trump, her Republican opponent, remains a wild card. His protectionist stance on trade and lack of political experience could introduce a period of uncertainty and volatility for markets, analysts say.

The market shock of a Trump win could derail the Federal Reserve's plans to raise interest rates in December, some analysts say. Any dent in U.S. growth from a surge of protectionism and faltering global trade could incite the central bank to resume a more dovish stance.

The perceived continuity of a Clinton White House, meanwhile, is broadly expected to keep the Fed on track, analysts say. In the Fed-fund futures market, the odds for a December Fed rate increase rose to 81.1%, up from 71.5% a day earlier, according to data from CME Group.

Memory of the short-lived market turmoil after Brexit remains fresh, so bond investors have been reducing their risk in recent weeks, fleeing emerging-market debt and selling longer-dated bonds.

"This is not an environment where you're going to make big bets," said Jim Veneau, head of Asia fixed income at AXA Investment Managers in Hong Kong.

Write to Rachel Rosenthal at Rachel.Rosenthal@wsj.com

(END) Dow Jones Newswires

November 08, 2016 20:51 ET (01:51 GMT)

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