Bonds slip as markets bet Biden goes big

U.S. Treasuries slipped on Thursday on a report that President-elect Joe Biden will announce a stimulus package as big as $2 trillion, while Japanese stocks surged to a new three-decade peak as investors extended bets on a global growth rebound. The yield on benchmark 10-year U.S. Treasuries rose two basis points to 1.1105% after CNN reported on the possibility Biden could spend $2 trillion, which is much more than market expectations and which would be funded by borrowing.

Japan’s Nikkei closed up 0.9% at its highest level since August 1990. It has gained 25% since the end of October. MSCI’s index of Asia shares outside Japan was steady a whisker short of Monday’s all-time high. S&P 500 futures, FTSE futures and EuroSTOXX 50 futures all rose about 0.2%. Treasury yields had tempered their surge this year on Wednesday as reassurances from the Federal Reserve about its purchase program calmed a heavy bond selloff and investors bet a big spending agenda can clear a Democrat-controlled Congress.

Biden is due to outline his economic plans later on Thursday and U.S. Federal Reserve Chairman Jerome Powell will also speak, either one of which could set yields rising again. Currency markets are taking a little more of a wait-and-see approach, as investors are short dollars and wondering whether the eventual tapering might limit the greenback’s decline. The dollar rose 0.2% to 104.12 yen with U.S. yields after the CNN report, which cited one lawmaker in contact with Biden’s advisers as its source. The Australian and New Zealand dollars firmed after slipping a little overnight, with the Aussie at $0.7761 and the kiwi at $0.7203. The euro nursed broad but modest losses at $1.2151 and 126.42 yen.

Bonds slip as markets bet Biden goes big, Reuters, Jan 14