Bond yields jump as Biden backs $2T coronavirus stimulus

10-year hits highest level since March

Longer-dated U.S. Treasury yields rallied Thursday morning after reports said President-elect Joe Biden has backed a COVID-19 relief package worth up to $2 trillion.

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The size of the stimulus package is larger than the $1.3 trillion plan that soon-to-be Senate Majority Leader Chuck Schumer, a Democrat from New York, was seeking, according to Bloomberg.

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The benchmark 10-year yield climbed as many as 2.9 basis points to 1.117%, touching its highest level since Mar. 19. The 30-year yield climbed up to 4 basis points to 1.858%.

Meanwhile, shorter-dated yields held little changed, with the two-year up 0.2 basis points at 0.149%.

Selling swung the yield curve steeper with the 2-10-year spread climbing to 95.8 basis points, its highest since January 2017. A steeper yield curve indicates investors are anticipating an economic rebound will occur earlier in that time frame rather than later.

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“Since early August 2020 the 10-year Treasury yield has been climbing, and we think we may see more of the same over the rest of 2021,” wrote Ryan Detrick, chief market strategist at LPL Financial.

The 10-year yield touched a record low 0.398% on Mar. 9, about a week before stay-at-home orders aimed at slowing the spread of COVID-19 were initiated. The yield revisited the 0.5% level in early August and has since been grinding higher.

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Detrick sees the rally in yields continuing throughout 2021 with the 10-year ending the year somewhere between 1.25% and 1.75% as further stimulus supports an economic rebound from the sharpest slowdown of the post-World War II era and as inflation picks up.

The 10-year reaching 1.4% to 1.5% could be an “attractive buying point from a technical perspective,” especially for foreign investors, Detrick said.