U.S. Treasury yields rose Thursday as investors monitored the prospects of additional fiscal easing under the incoming administration of President-elect Joe Biden.
What are Treasurys doing?
The 10-year Treasury note yield
TMUBMUSD10Y,
1.077%
rose 2.9 basis points to 1.070%, its highest since March 19, while the 2-year note rate
TMUBMUSD02Y,
0.136%
edged 04 basis point lower to 0.139%. The 30-year bond yield
TMUBMUSD30Y,
1.851%
added 2.5 basis points to 1.844%.
What’s driving Treasurys?
Markets shrugged off riots in Washington D.C. on Wednesday that saw a mob force its way into the Capitol building, disrupting a Congressional debate on the confirmation of Biden as president from January 20. Lawmakers later returned to Capitol Hill to ratify the election results, certifying President-elect Joe Biden’s victory early Thursday.
More importantly for markets, the win by Democrats on Wednesday in the runoff elections for two U.S. Senate seats, giving them control of Congress, raised the prospect of more generous fiscal stimulus measures and the issuance of more government debt.
Extra fiscal stimulus to boost the economic recovery from the coronavirus pandemic may result in inflation rising and holders of Treasury inflation-protected securities now anticipate growth in consumer prices to average 2.10% over the next decade, above the central bank’s 2% target.
St. Louis Federal Reserve President James Bullard said the U.S. economy could see higher inflation than people are used to in 2021.
See: Fed’s Bullard says inflation may be ‘higher that we’re used to’ this year
Traders also took a look at some U.S. economic data on Thursday. Initial weekly jobless claims ran at 787,000, while November trade deficit widened 8% in November.
The Institute for Supply Management’s gauge of services industry activity jumped to a reading of 57.2 in December, from 55.9 in the previous month. Any number above 50 represents an expansion of activity.
What did market participants say?
“There are a lot of factors in play for bonds this week. In a rank ordering, the election results in Georgia and speculation around fiscal stimulus has to be at the top and basically overwhelms everything else else, including what happened in D.C.,” Ed Al-Hussainy, senior interest rate and currency strategist at Columbia Threadneedle, told MarketWatch.
