Yields Rising on the 10-year Treasury
Over this week the yield 10-year Treasury has risen dramatically causing a fairly sizable market sell off yesterday. Currently the 10-year Treasury is 1.45% after reaching a height of 1.6% in yesterday’s session. (Note yields and prices of bonds are inverse) During yesterday’s trading session the 10-year reached a level it had not been in over a year causing a significant selloff on the NASDAQ. Investors fear that the rise in bond yields could be a precursor to faster than expected inflation. Federal Reserve Chairman Jerome Powell spoke to Congress earlier this week and downplayed inflation fears. It remains uncertain if Powell will amend his statements or if the Fed will change its policy.
House Set to Vote on $1.9 Trillion Covid Relief Bill
The House of Representatives is planning to pass President Joe Biden’s Covid Stimulus bill. The stated goal is to have the legislation passed by both the House and Senate and sent to the President’s desk by mid March. The promised $15 minimum wage will not be in the bill. The Senate Parliamentarian ruled that the provision could not be used if the bill was to be a reconciliation bill. The House is expected to vote on the bill with the wage language and the Senate will be forced to remove it.
The main aspects of the bill include:
- $1400 stimulus checks
- $400/wk unemployment through August 29
- $70 billion for Covid testing and vaccination programs
The Administration is hoping that this bill will get the economy back to the 2019 full employment level from before the pandemic. However, with any massive government spending proposal there are always some risks. If Covid persists or gets worse there may not be a lot left in the quiver for the Fed or the Administration to use. As previously stated the ever looming prospect of inflation is worrying some investors. Additionally, the federal provisions eliminating evictions and foreclosures will have to be lifted eventually potentially forcing millions out of their homes. There is still uncertainty surrounding the virus and the government’s economic policy to combat the lockdowns.