Higher Bond Yields Expected under Biden's $2 Trillion Infrastructure Plan

The 10-Year Treasury Yields in the US and other countries worldwide will again determine the market trends of gold, stocks, and forex. In fact, the Treasury has seen its yield soaring in the US since the Democrats narrowly won the last two Senate seats. Such dynamic sparked a reversal in the weak DXY at the expense of the Nasdaq index. The financial market has been expecting Biden's string of policies to receive approvals smoothly since the narrow victory on January 6. Basically, Biden's economic policies have shown three priorities.

The first one is the $1.9 trillion stimulus plan just passed by the House of Representatives. The financial market is convinced of its positive role in the economic recovery, as well as in the inflation rebound.

The $2 trillion infrastructure plan comes as the second one. The plan also helps stimulate economic revival and inflation hike because the prices of raw materials, such as iron ore, copper, and aluminum, will surge amid heavy demands of the infrastructure programs. In addition, other commodities affecting people's livelihoods have risen sharply at the same time, fueling inflation even higher. These two plans both bring about expectations of economic recovery and inflation rise, driving up bond yields by dragging down its prices. It is estimated that Biden will launch the infrastructure plan next week, at the soonest, or later at the end of the month. Such a huge infrastructure program will definitely boost the base metals in demand, with another bull market of commodities on the way.

It is believed that Yellen will launch a tax increase program on top of Biden's two plans, which bodes well for the dollar to a large extent.

Both these two plans will jolt bond yields upwards. The Department of the Treasury just auctioned a batch of government bonds worthy of nearly $300 billion. The following positive response to the auction lifted bond prices, which slightly punished the yields. The Fed's rate meeting next Wednesday (March 17) has been thrust into the spotlight. All eyes are on Powell to see whether he will respond to the recently spiking Treasury yield. If he gives no comments, shows no worries, or indicates no intervention, chances are the 10-Year Treasury bond will turn around the previous setback and challenge the 2% level.