Ahead of Infrastructure Investment Announcement... US Treasury Yields Reach Highest in 14 Months

[Asia Economy New York=Correspondents Baek Jong-min and Jo Yoo-jin] U.S. Treasury yields surged to their highest level in 14 months. Expectations for an early U.S. economic recovery, along with the large-scale infrastructure investment plan by President Joe Biden set to be announced tomorrow, are unsettling the bond market.

The yield on the 10-year U.S. Treasury note rose to 1.77% on the 30th (local time), marking the highest level in 14 months. Although Treasury yields later gave back some of the gains and fell to around 1.71%, forecasts suggest a strong possibility of further increases.

Expectations for an early economic recovery due to large-scale investment and concerns over rising inflation are directly impacting the U.S. capital markets. On the same day, The Washington Post (WP) reported, citing sources, that President Biden will unveil a $2.25 trillion (approximately 2,554 trillion KRW) infrastructure stimulus plan in Pittsburgh on the 31st.

White House Press Secretary Jen Psaki recently indicated in an interview with Fox News that the infrastructure investment bill would be announced in two phases. The market expects the total infrastructure investment to reach between $3 trillion and $4 trillion. WP anticipated that the total infrastructure investment budget would exceed $4 trillion.

The stimulus plan to be unveiled focuses on physical infrastructure investments such as roads, ports, water supply improvements, housing, telecommunications, and manufacturing promotion. Sources also reported that measures for elderly and disabled family care provision and expansion of housing infrastructure are included.

Expectations for a U.S. economic recovery are also rising. According to the U.S. Consumer Confidence Index released by the Conference Board on the same day, the index recorded 109.7 this month, the highest since the COVID-19 pandemic began in February last year. This is a significant increase from last month’s 90.4. Analysts attribute this to the execution of U.S. stimulus measures and the expansion of vaccine distribution driving the economic recovery.

Joseph Stiglitz, Nobel laureate in economics and former Vice President of the World Bank and a professor at Columbia University, said in an interview with the online media Axios that "Biden administration’s infrastructure investment plan will be an opportunity to rebuild the U.S. economy and break through the abnormal low inflation that has persisted over the past 20 years due to underinvestment."

Professor Stiglitz added, "I am optimistic that (the infrastructure investment plan) can transform the economy into a more equitable and robust growth phase, as inequality has led to demand shortages, and demand shortages have resulted in investment stagnation."

Following the rise in Treasury yields, mortgage rates also increased, and the dollar strengthened. The dollar index, which measures the dollar’s value against major currencies, surpassed 93, marking the highest level in four months. Major indices on the New York Stock Exchange also closed lower on the day.

This content was produced with the assistance of AI translation services.