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Thursday, December 9, 2021

10-year Treasury yield rises to 1.6% after Senate passes stimulus package

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The 10-year U.S. Treasury yield topped 1.6% on Monday, after the Senate passed a $1.9 trillion coronavirus economic relief and stimulus bill on Saturday.

The yield on the benchmark 10-year Treasury note hit a high of 1.613% and last traded 4 basis points higher at 1.59%. The yield on the 30-year Treasury bond rose to 2.311%. Yields move inversely to prices.

Senators passed the stimulus bill through budget reconciliation, a process that required no Republican support but every Democratic vote.

The Democratic-held House aims to pass the bill on Tuesday, and send it to President Joe Biden for his signature before a March 14 deadline to renew unemployment aid programs. Biden said Saturday that Americans will start getting their stimulus checks this month.

“We believe it is logical for yields to test the 2020 highs (1.95%) as most asset classes have already broken above their respective 2020 highs,” JC O’Hara, chief market technician at MKM Partners, said in a note. “Our best guess is that yields will not move to that level in a straight line.”

Treasury yields have been moving rapidly higher recently amid expectations of economic recovery from the pandemic and concerns about a rise in inflation.

Ambrose Crofton, global market strategist at JPMorgan Asset Management, noted in a comment Friday that this recent spike in yields has caused “some indigestion in equity markets.”

However, Crofton said investors should take comfort from comments made by Federal Reserve Chairman Jerome Powell last week, indicating that “should markets become disorderly, then action would be taken to maintain favorable financial conditions and keep the economy on the path to full employment.”

Powell said at a Wall Street Journal conference last week that he was “very mindful” of the lessons from runaway inflation in the 1960s and ’70s, but believes the current situation is different.

Auctions will be held on Monday for $54 billion of 13-week bills and $51 billion of 26-week bills.

CNBC’s Jacob Pramuk contributed to this report.

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