The successful passage of the US stimulus bill dominated news this week. It was quite a result for the Biden presidency, especially as the full amount was passed and the final tweaks to the bill were very few. Key highlights include $400bn in payments to individuals, $350bn in aid to state and local governments, $226bn for schools and childcare, $163bn unemployment insurance and $109bn for public health.
Not surprisingly, 10-year bond yields began their upward climb. At the time of writing, the US 10-year yield had risen to 1.625%. It wasn’t alone either: the German, UK and Australian 10-year bonds are also up strongly.
The combination of a speedy vaccination programme and new round of payments to households (as soon as next week) sets in place the next phase of bond yield increases. Year-end forecasts for US 10-year yields have been at 2% at the top end. We are not far away from it already. Furthermore, the passage of this Bill is just the first step. Still to follow are an Infrastructure Bill and the Green Bill, both of which could also be significant.