Bond Report: U.S. Treasury yields renew climb on fiscal spending prospects

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U.S. Treasury yields rose Thursday amid anticipation that the Biden administration would press forward with significant additional fiscal spending measures to help the economy recover from the coronavirus pandemic.

What are Treasurys doing?

The 10-year Treasury note yield TMUBMUSD10Y, 1.128% climbed 3.9 basis points to 1.128%, while the 2-year note rate TMUBMUSD02Y, 0.153% was flat at 0.145%. The 30-year bond yield TMUBMUSD30Y, 1.872% added 5.5 basis points to 1.874%. Bond prices move inversely to yields.

What’s driving Treasurys?

U.S. Treasuries came under pressure after news reports indicated President-elect Joe Biden would propose $2 trillion of additional spending to see the economy through the pandemic. Biden will outline his fiscal agenda later on Thursday evening.

See: Biden to call for stimulus checks, more vaccine funds in Thursday speech

However, U.S. weekly jobless benefit claims rose by 181,000 to a five-month high of 965,000 in early January while continuing state jobless claims climbed 199,000 to 5.07 million, suggesting economic growth is stalling as the new year begins.

Still, many are looking out into the future when widespread vaccine distribution will allow large parts of the economy to reopen and contribute to the recovery.

Investors continued to eye the Federal Reserve. Recent comments by some members of the policymaking committee have heightened market fears the central bank could taper its asset purchases sooner than expected.

But Fed Gov. Lael Brainard and Vice Chairman Richard Clarida have said they anticipate the Fed’s bond-buying program to stay at the current pace throughout 2021. Fed Chairman Jerome Powell also pushed back against the idea of tapering asset purchases on Thursday.

What did market participants say?

“Just as investors debate how quickly this year’s economic rebound will cause the Fed to taper its stimulative policies, we have news of an aggressive stimulus package from the new Biden administration.  The clear winner will most likely be inflation,” said Bryce Doty, senior portfolio manager at Sit Investment Associates.