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Senate Infrastructure Bill Sends Rates Higher

Yields push higher for 5th straight session

Swap rates and yields increased across a flattening curve during today’s trading session, highlighted by the news of the Senate passing its bipartisan infrastructure bill. Hawkish sentiment from the potential spending-induced inflationary pressures was offset by Chicago Fed President Charles Evans’ comments that he would “like to see a few more employment reports” before making a taper announcement. With only one jobs report printing before the Fed members meet in September, Evans comments put some cold water on a potential September announcement.  The 5y UST yield closed up 3 bps to 0.83% – its highest level in nearly a month.

Senate passes $1.2 trillion infrastructure bill

The Senate voted to pass the $1.2T infrastructure bill (includes $550B in new spending) by a 69 to 30 margin today. The current bill includes $110B in spending for roads and bridges, $73B for power grid improvements, $55B for clean water, and $65B for expanding broadband. Immediately following the passing, the Senate turned its attention to a broader $3.5 trillion spending package – a bill which House Speaker Nancy Pelosi requires to be approved for her chamber to pass today’s bill. Overall, the positive news assisted in pushing the DJIA and S&P 500 to record closing highs, with steel-related stocks rising on the anticipated infrastructure spending.

CPI data released tomorrow

July’s consumer price index data will be released tomorrow with analysts expecting consumer prices to have grown at the slowest pace in five months, but remain elevated. Analysts expect MoM headline CPI to be +0.5%, down from June’s +0.9% print. While moderation is expected, CPI has topped analysts estimates the past four months while remaining well above the Fed’s 2% target level.

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