Treasury Market’s Bets on 2021 Reflation Face January
Yields on 10-year U.S. Treasuries surpassed 1.26% on Tuesday for the first time since last March, as expectations of fiscal and monetary stimulus coupled with hopes of an economic rebound supported an advance in reflation operations.
* The 10-year paper return climbed to 1,267%, up 6 basis points on the day, before falling to 1,245% at 1315 GMT.
* US Treasuries were catching up with the selloff the global bond market saw on Monday when US markets were closed for a holiday.
* The return of the 10-year bund climbed to its highest level in six months on Monday, while yields on Swiss 30-year debt rose above 0% for the first time since last April.
* The yield on the US 30-year bond was also up, hitting a one-year high of 2.08% and is about 40 basis points above its close in 2020.
* US President Joe Biden has been gathering support for a $ 1.9 trillion aid package. In addition, optimism about the vaccination campaigns has raised stocks and commodities at the expense of safe-haven assets such as US Treasuries and German debt.
* The yield curve between 2-year and 10-year Treasury debt, considered a reliable barometer of growth expectations, was steepening. The gap is around 114 basis points, the widest since April 2017.
* But while long-term yields have skyrocketed, the costs of 2-year borrowing have barely budged since late 2020 given expectations that the Federal Reserve will keep interest rates close to zero for years to come.