FXStreet reports that strategists at Morgan Stanley think a major fiscal package isn't in the price and that progress towards a substantial pickup in approved government spending could push yields higher.
“Bond investors should be attuned to the Democrats' deliberations on budget reconciliation. Remember, Democratic leadership in Congress is committed to not moving the smaller $600 billion bipartisan infrastructure bill without the larger reconciliation-driven infrastructure package. And last night, the Democrats announced the size of their reconciliation bill: $3.5 trillion. That means the US is gearing up to approve $4 trillion in new spending over the next 10 years, matching our base case.”
“In our view this would translate to about $250 to $500 billion in federal budget deficit expansion next year. Our estimates based on the assumption that Congress may only be able to agree to about $2 trillion in new revenues to offset the planned spending. That would mean that the US would effectively be embarking on another round of fiscal expansion next year. That should have a positive impact on GDP growth, and a positive impact on Treasury bond supply. In short, it should push bond yields higher”
© 2000-2022. All rights reserved.
This site is managed by Teletrade D.J. Limited 20599 IBC 2012 (First Floor, First St. Vincent Bank Ltd Building, James Street, Kingstown, St. Vincent and the Grenadines).
The information on this website is for informational purposes only and does not constitute any investment advice.
Making transactions on financial markets with marginal financial instruments opens up wide possibilities and allows investors who are willing to take risks to earn high profits, carrying a potentially high risk of losses at the same time. Therefore you should responsibly approach the issue of choosing the appropriate investment strategy, taking the available resources into account, before starting trading.
Use of the information: full or partial use of materials from this website must always be referenced to TeleTrade as the source of information. Use of the materials on the Internet must be accompanied by a hyperlink to teletrade.org. Automatic import of materials and information from this website is prohibited.
Please contact our PR department if you have any questions or need assistance at email@example.com.