Daily Market Color

Rates Rise Ahead of Biden’s Stimulus Briefing

Treasury yields rise ahead of Biden’s stimulus briefing later this evening
Biden will formally introduce a $1.9 trillion proposal called the American Rescue Plan later tonight.  The prospect of more extensive aid pushed stocks higher earlier in the day, but major equity indices pared their gains in the final hour – the S&P 500 and DJIA closing 0.4% and 0.2% lower, respectively.  Treasury yields and swap rates climbed sharply higher across the steepening curve – the 2y10y spread widening out to 99 basis points while the 10-year Treasury yield rose 5 basis points to 1.13%.
President-elect Biden reveals $1.9 trillion American Rescue Plan
The proposal is the first of two initiatives Biden will pursue early on, with a second spending proposal expected in February.  The plan includes:
– Additional $1,400 direct stimulus checks
– $400-a-week unemployment benefits
– $350 billion for state and local aid
– $20 billion for COVID-19 vaccine distribution
Fed Chair Jerome Powell does not anticipate a rate hike for the foreseeable future
During his speech today, Powell explained a hike would likely not happen until core inflation rises above the Fed’s 2% target (currently ~1.4%).  Until then, the bank’s policy will remain accommodative.  He added that though the economy still faces many longer-run challenges, “there were no obvious imbalances that threatened the ongoing expansion.”
Initial jobless claims rose to 965,000 last week
The figure missed expectations, rising to the highest weekly total since August.  The four-week moving average jumped up to 834,250, as pandemic-related restrictions continue to take a toll on the economy.

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