U.S. Treasury yields slip after Biden outlines aid package

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U.S. Treasury yields fell early Friday after President-elect Joe Biden outlined his $1.9 billion fiscal stimulus package late Thursday which was received with some skepticism from market participants who expect the proposal to struggle to pass in Congress.

What are Treasurys doing?

The 10-year Treasury note yield

fell 2.9 basis points to 1.102%, while the 2-year note rate

edged 0.6 basis point to 0.141%. The 30-year bond yield

slid 3.1 basis points to 1.843%. Bond prices move inversely to yields.

What’s driving Treasurys?

Biden’s coronavirus aid package was met with little reaction as investors doubted his ability to pass the bill in its current form, even in a Democratic-controlled Congress. They noted measures such as an increase to the national minimum wage may not receive support from Republican lawmakers.

Lingering questions around the bill’s viability has led some market participants to push back the timetable for further fiscal aid.

Since Biden’s announcement on Thursday evening, U.S. bond yields have slipped as have equity futures.

Investors will also watch a rush of U.S. economic data on Friday. December retail sales, the producer price index, December industrial production data, and a preliminary reading of consumer sentiment in January are all due early Friday.

What did market participants say?

“The blue sweep doesn’t guarantee wholesale ratification of the president-elect’s agenda, as much as the incoming administration might like to assume that’s the case. The net takeaway being that even if the bailout funding makes it into law largely as proposed, it’s likely to take longer than initially expected given the composition on Congress ,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.

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