The yield on longer-term U.S. Treasuries rose sharply on Thursday morning after reports that the COVID-19 relief package supported by President-elect Biden was worth as much as $2 trillion.
According to Bloomberg News, the stimulus package is larger than the plan of Chuck Schumer, who is about to become the majority leader of the Senate, and the latter is the $1.3 trillion plan sought by Democrats in New York.
The yield on the benchmark 10-year Treasury note climbed 2.9 basis points to 1.117%, its highest level since March 19. The 30-year Treasury bond yield climbed 4 basis points to 1.858%.
At the same time, the short-term yield has not changed much, with the two-year yield rising by 0.2 basis points to 0.149%.
The sell-off made the yield curve steeper, and its 2-10 year spread climbed to 95.8 basis points, the highest level since January 2017. The steep yield curve indicates that investors expect the economic rebound to occur within this time frame rather than later.
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Ryan Detrick, chief market strategist at LPL Financial, wrote: “Since the beginning of August 2020, the 10-year Treasury yield has been climbing, and we believe that in the rest of 2021, we may see more yields. “
The October Treasury bond yield hit a record low of 0.398% on March 9. It was about a week later that the nationwide order to slow the spread of COVID-19 began. In early August, the yield returned to 0.5% again and has been rising ever since.
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Detrick believes that the yield will continue to rise by 2021, and the 10-year yield by the end of the year will be between 1.25% and 1.75%. This is due to further stimulus measures supporting World War II. The most serious economic slowdown and the economic rebound brought about by the rebound in inflation.
Detrick said that a 10-year period of 1.4% to 1.5% may be “an attractive buying point from a technical point of view”, especially for foreign investors.