Investors are piling into the safety of U.S. government debt, pushing the yield on the 10-year Treasury note above 1% for the first time since March of 2020.
10-YEAR YIELD HITS 1.047%
With the Democrats moving to full control of the Senate, along with the House, spending is likely on the rise.
“I think we are going to see a lot more government spending,” predicted Ed Yardeni of Yardeni Research.
Still, he said bond yields should be even higher if not for the “key politician or power“ in Washington; Fed Chair Jerome Powell, who will keep liquidity flowing.
“The market is looking ahead and saying no matter what happens we are not going to get a recession in 2021, maybe 2022 but not this year” he added
Wells Fargo also shares the view that the economy will remain steady this year, keeping yields in check.
“A better economy this year will likely help push interest rates higher. For example, we see the yield on the 10-year Treasury note trading in the 1% to 1.5% range at year-end, only modestly higher than the current yield,” wrote Scott Wren, senior global market strategist, in his latest research note.
Higher yields mean banks can charge more interest hence financial stocks are moving higher.
Powell, whose four-year term ends in 2022, will work closely with incoming Treasury Secretary Janet Yellen, who was also the first woman to head the Federal Reserve and will take over for Steven Mnuchin.
Last month, Powell was asked if he had spoken to his former Fed colleague about policy.
“I really have only spoken to former Chair Yellen to congratulate her on being nominated and just to say that I look forward to working with her. You know, I did work very closely with her for five years before she left and have stayed in touch,” he explained while adding, “I have not discussed, you know, policy with her. And I, I’m not going to do that until she’s confirmed” he said.
As for the Georgia election, Democrat Jon Ossoff said he won his Georgia Senate runoff race on Wednesday morning as Republican David Perdue’s campaign said they will “exhaust” all legal options to ensure only “legally cast” ballots are counted.
