Current bond market dynamics

The yield on the benchmark 10-year Treasury bill rose to 1.77%. Investors believe that US President Joe Biden's spending plan will further boost economic recovery and therefore inflation.

The yield on the benchmark 10-year Treasury bill rose to 1.77%. Investors believe that US President Joe Biden's spending plan will further boost economic recovery and therefore inflation. The March CB consumer confidence announced yesterday showed that it jumped to 109.7, exceeding the expected 96.9, this is important in terms of showing increased optimism… As the difference between 2-year and 10-year bond yields has increased, the slope of the yield curve is also in an upward trend, that is, getting steep. The upward trend in long-term interest rates seems to continue as the current economic recovery and fed by the warming in inflation, although the Fed sees it as temporary. The critical point here is that the far side of the yield curve is affected. In other words, there is an expectation for an increase in inflation and interest rates in the long term. Maybe, the road from under 1% will not be similar in percentage terms, but the movement will continue upward. We follow 2% as a threshold.

 

The event of the day will be the speech of US President Biden, who is expected to announce an infrastructure investment program of up to 3 trillion USD, which is also expected to include tax increases. We will be watching March non-farm payroll data on Friday. Employment growth, which was already good in February, is expected to be around 600K in March, and unemployment is expected to decrease to 6%. If it comes in the expected direction, it will have an upward effect on bond yields. As it tightens the borrowing conditions, the stock market reflection will be in the form of good data-bad pricing like the “taper tantrum” period a few years ago.

 

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