Why the bond market isn’t blinking — so far — at Biden’s plan to spend trillions on infrastructure

Marketwatch2021-04-06

Unlike previous stimulus bill, spending for infrastructure will be spread out over several years. With a potential $2.3 trillion infrastructure bill looming over Washington, bondholders might be ...

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Comments

NovelChew
2021-04-06
NovelChew
Nice
Daniel Tay
2021-04-06
Daniel Tay
Noted..
Yoxin
2021-04-06
Yoxin
Ok
- Yoxin:
  Ok

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In addition, the recent haggling among lawmakers shows the lack of clarity on how the infrastructure bill will eventually be financed, and obscuring how much debt issuance will be needed.\nLike the $1.9 trillion relief package signed in March, Republicans and Democrats are expected to scrap over the contents of the legislation even as analysts expect an infrastructure bill to ultimately become law.\n“In some form, trillions are going to get spent,” said Eric Merlis, head of global markets trading at Citizens Bank, in an interview.\nFor many debt investors, the question around the infrastructure plan is not how much will be passed, but how Washington will come up with the funds for the multitrillion dollar bill.\n“What matters to rates traders is how are we going to pay for it?” Gregory Faranello, head of U.S. rates at AmeriVet Securities, told MarketWatch.\nHe noted much of the emergency spending passed by Congress so far had been financed through new debt issuance, but the Biden administration’s interest in funding infrastructure through higher corporate taxes could influence how investors work out the longer-term impact on the Treasury’s deficits.\nThough both parties have issued calls for more infrastructure spending, the scale of the package and the use of tax increases to finance it may scuttle prospects for Republican support.\nIn that event, Democrats would need to go it alone and work out among themselves how to pay for the infrastructure package, said Nancy Vanden Houten, lead economist at Oxford Economics.\nThat still leaves plenty of uncertainty as it would hand centrist Democrats like West Virginia Sen. Joe Manchin significant influence in the bill’s final appearance.\nIndeed, Manchin said he could support an increase to a corporate tax rate to 25% from the current 21%, instead of an increase to 28% proposed by the Biden administration.\nAnother issue is that the ultimate economic benefits from the bill are longer-term in nature as the infrastructure funds would increase over time and be spread over several years, said Vanden Houten.\nThis could add to the difficulties of analysts and traders trying to estimate the growth and inflation boost from the trillions of federal funds already coursing through U.S. banks, businesses and households after Washington deployed an unprecedented level of fiscal support to see the economy through the devastating COVID-19 pandemic.\nThe uncertain risk of inflationary pressures has put pressure on the bond market this year, sending long-term debt yields toward pre-pandemic levels.\nThe 10-year Treasury note yieldTMUBMUSD10Y,1.712%stood at around 1.71%, a few basis points away from its 14-month high of 1.77%. Bond prices move in the opposite direction of yields.\nOn the other hand,the rosy economic outlookhas given equities a lift. The S&P 500SPX,+1.44%and the Dow Jones Industrial AverageDJIA,+1.13%hit new all-time highs on Monday, both trading up over 1%.","kind":null,"is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":343832678,"gmtCreate":1617700181294,"gmtModify":1704701933190,"author":{"id":"3573693383322975","authorId":"3573693383322975","authorIdStr":"3573693383322975","name":"NovelChew","avatar":"https://static.tigerbbs.com/3cc4d2fe2028353323fd69523caa4c1c","vip":1,"crmLevel":4,"crmLevelSwitch":0,"idStr":"3573693383322975"},"htmlText":"Nice&nbsp;","listText":"Nice&nbsp;","text":"Nice","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/343832678","repostId":1165295299,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":343899993,"gmtCreate":1617698487412,"gmtModify":1704701912754,"author":{"id":"3573623220650432","authorId":"3573623220650432","authorIdStr":"3573623220650432","name":"Daniel Tay","avatar":"https://static.tigerbbs.com/084a34a7e85f0f077a0253b0ee1a1dbc","vip":1,"hat":"https://static.tigerbbs.com/b0a2963eb37c60c5d6d4a8dbcd266952","crmLevel":4,"crmLevelSwitch":1,"idStr":"3573623220650432"},"htmlText":"Noted..&nbsp;","listText":"Noted..&nbsp;","text":"Noted..","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/343899993","repostId":1165295299,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":343172296,"gmtCreate":1617696919615,"gmtModify":1704701893646,"author":{"id":"3571470148893542","authorId":"3571470148893542","authorIdStr":"3571470148893542","name":"Yoxin","avatar":"https://static.tigerbbs.com/3184024bf3d660bd49cc2158ebd27b3f","vip":1,"crmLevel":1,"crmLevelSwitch":0,"idStr":"3571470148893542"},"htmlText":"Ok","listText":"Ok","text":"Ok","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/343172296","repostId":1165295299,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":3969267,"gmtCreate":1617696928046,"gmtModify":1680783035612,"authorId":3571470148893542,"author":{"id":3571470148893542,"authorId":3571470148893542,"name":"Yoxin","avatar":"https://static.tigerbbs.com/3184024bf3d660bd49cc2158ebd27b3f","vip":1,"crmLevel":1,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":343172296,"type":1,"supId":0,"prevId":0,"content":"Ok","text":"Ok","html":"Ok"}],"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":6,"commentSize":3,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.28.3","shortVersion":"4.28.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1165295299"}