The 10-year U.S. Treasury Yield Breaks 14-month Record, Hikes over 1.77%
COVID-19 vaccine rollouts and stimulus package are the wild cards.
With COVID-19 vaccine rollouts started to show results and the positive expectations from the infrastructure spending plan, the U.S. 10-year Treasury yield rose above 1.77%; a 14-month high.
It was marked at 1.772% at 4:40 a.m. on March 30, 2021. Eastern time on Tuesday. The last time 10-year Treasury bond yield was noted this high was in January 2020, well before the coronavirus spread captured the entire world tightly in its net.
Along with this, the 30-year Treasury bond yield also increased to 2.456%.
The key factors behind these hikes are the promising outcomes of the vaccine rollouts and expectations of an economic recovery leading to a rising inflation scenario because of the $3 trillion stimulus package to be launched by U.S. President Joe Biden on March 31, 2021.
“Stimulus and any infrastructure plan are likely to prove to be a sugar rush for the economy given the secular headwinds” stated HSBC strategists in a note released on Monday.
While Credit Suisse strategists on Tuesday said that the 10-year bond yield is likely to reach 2% during Q2. an ING strategist while conversing with CNBC raised the expectations to be over 2%.
The rising yield suggests the risk of increasing inflation as the economy marches northwards. Just earlier this month, the U.S. President signed an economic stimulus package of $1.9 trillion, and now with another package of $3 trillion, it would mend for higher prices.
Tuesday in a press note, Unigestion Investment Manager Olivier Marciot pointed out that “there is a risk that inflation pressures will be less transitory than expected, increasing the odds of the Fed sitting ‘behind the curve’ and later being forced to change course more rapidly than projected.” This also means that the Fed rate hike may be closer than anticipated earlier.
Simultaneously, there is a rising concern over increasing cases of COVID-19 in the U.S. As per Johns Hopkins University data, on a 7-day average, 63,000 new cases got reported daily in the nation.
