Treasury yields rise to highest in 14 months as vaccinations accelerate and Biden prepares to unveil new spending plan

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S.,  June 2, 2017. REUTERS/Brendan McDermid
Traders work on the floor of the NYSE in New York.

  • The 10-year Treasury yield surpassed 1.7% on Tuesday, hitting a new 14-month high.
  • Investors are preparing for the government to issue more debt as President Biden reportedly seeks $4 trillion in infrastructure spending.
  • Technology stocks are lower as the 10-year marches higher.
  • See more stories on Insider’s business page.

Borrowing costs gauged by the 10-year Treasury yield hit a 14-month high Tuesday, with investors pricing in expectations of higher inflation and a stronger US economy as the government prepares to announce a new multi-trillion spending plan and more Americans receive COVID-19 vaccinations.

The 10-year yield marched up to 1.778% from 1.712% on Monday, extending this year’s fast-paced gain from about 0.9%. Alongside the gains have been pullbacks in technology shares that have largely surged in value since last March as investors sought exposure to companies that would fare well during extended pandemic-lockdown periods. Nasdaq-100 futures on Tuesday fell 0.8%.

The advance in the 10-year yield came as investors prepared for the unveiling by President Joe Biden of a $4 trillion infrastructure plan, potentially on Wednesday, according to the Washington Post. The price tag would include $3.5 trillion in tax hikes, the report said.

Such a pickup in spending would follow the $1.9 trillion fiscal stimulus package put into place earlier this month and more spending would lead the US government to seek more money to fund its plans.

“The prospect of higher debt issuance has seen the bond bears return lifting yields in the 10-year Treasury back above 1.70%,” and pushing up the US dollar, said Sophie Griffiths, a US and UK market analyst at Oanda, in a note.

While Washington and Wall Street gear up for more spending and higher consumer and producer prices, more Americans have been getting coronavirus vaccinations each day. Economists say a healthier population will lead to more businesses reopening and expanding their services. President Biden on Monday said 90% of Americans will be eligible for vaccinations by April 19.

While vaccinations are on the rise, so are new cases of COVID-19. Average daily cases are up about 15% in the past two weeks and average weekly hospitalizations have increased by 5%, the Centers for Disease Control and Prevention warned Monday.

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Tech stocks rebound as Treasury yields stabilize amid inflation fears

nyse surprised trader
  • Tech stocks staged a rebound on Friday amid stabilizing Treasury yields after a sharp sell-off the previous day.
  • On Friday morning an announcement from the Federal Reserve regarding bank capital rules sent the 10-year yield higher and banks stocks lower.
  • Yields rose this week as investors grew concerned that the stimulus will cause a rise in inflation.
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Tech stocks rebounded Friday after a sharp-sell off the previous day as Treasury yields stabilized.

Earlier on Friday, the Fed announced that its temporary pandemic-era rule that relaxed bank capital requirements will not be extended after March 31. That offset the positive effect of stabilizing bond yields, which then spiked on the news.

Bond yields have risen as investors grow concerned that the $1.9 trillion fiscal stimulus will cause a rise in inflation, leading the Federal Reserve to change policy and raise rates sooner than expected.

But some on Wall Street aren’t concerned about the 10-year rising for much longer. JPMorgan’s Marko Kolanovic expects yields to stabilize, pushing tech stocks higher and helping the S&P 500 finish the year at 4,400, a 12% gain from current levels.

Here’s where US indexes stood after the 4 p.m. close on Friday:

The Fed’s decision to let the bank capital requirement rule expire sent bank stocks lower on Friday. Shares of JPMorgan Chase, Bank of America, Wells Fargo, and Citigroup all ended in the red.

Shares of Visa slipped as much as 6% on Friday after a report said the Department of Justice is investigating the firm’s debit-card practices. Visa is under investigation for “anticompetitive practices” in the debit-card market, reported the Wall Street Journal, citing unnamed sources.

Oil prices rose after tumbling 7% on Thursday. West Texas Intermediate crude rose as much as 2.9%, to $61.72 per barrel. Brent crude, oil’s international benchmark, rose 2.6%, to $64.95 per barrel, at intraday highs.

Gold jumped as much as 0.5%, to $1,745.47 per ounce.

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