U.S. Treasury yields jumped Monday following the Senate’s approval of the $1.9 trillion Covid-19 relief bill over the weekend, which moves President Biden’s key spending package closer to being signed into law.
The huge stimulus, which faces a final vote in the House as early as Tuesday, is expected to boost the U.S. economy just as vaccinations allow more businesses to reopen, driving a burst of activity and a likely pickup in inflation.
The 10-year yield briefly rose as high as 1.610% on Monday morning, surpassing the 1.609% hit when Treasurys sold off sharply on Feb. 25, according to Tradeweb, before dropping back to 1.598%. Bond yields rise when prices fall.
The rise in yields is also putting pressure on growth stocks, such as technology companies, whose valuations are linked to prevailing discount rates for long-term cashflows. The Nasdaq-100 dipped 1.7% in futures markets Monday morning.
The Federal Reserve has been sanguine in its response to rising yields because it sees them as a sign of the brightening outlook for the economy. It also now targets an average inflation rate over time, which means the central bank would allow inflation to run above its 2% target for a spell before tightening monetary policy.