US 10-year Treasury yields snap two-day fall as inflation fears renew

• US Treasury yields rebound, helping S&P 500 Futures to pick up bids.
• US BBB plan, Japan stimulus and China push to cut taxes/fees brighten the mood.
• US inflation expectations also regain amid mixed Fedspeak, US data.

Market sentiment brightens during early Friday as global policymakers push for easy money. Be it Japan’s mega spending plan or the US “Build Back Better”, not to forget China’s defense from Evergrande woes, everything hints at more money in the system going forward. The same propels equity bulls, fears of inflation also get a fresh life due to these catalysts and recall US bond bears, favoring Treasury yields.

While portraying the mood, S&P 500 Futures rises 0.25% to refresh the record top with 4,713 level whereas the benchmark US 10-year Treasury yields rise 1.1 basis points (bps) 1.598% at the latest.

It’s worth noting that the US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, also underpin the Treasury yields of late. That said, the inflation gauge rose for the first time last three days by the end of Thursday's North American session, per the data source Reuters.

Hawkish rhetoric from NY Fed President and FOMC Vice-Chair John Williams could be cited as the key catalysts to renew the inflation fears on Thursday. Also on the positive side were firmer prints of the Philadelphia Fed Manufacturing Survey for November, 39 versus 24 expected, as well as softer-than-previous US Initial Jobless Claims of 268.

Talking about stimulus headlines, the White House expects that the Build Back Better (BBB) plan would reduce the deficit by $112 billion over the next decade in its new analysis and the same increases the odds of the climate and social spending bill’s passage as its getting voted. Further, Japanese Prime Minister Fumio Kishida announced a fresh spending plan of around 56 trillion yen ($490 billion) during early Friday. On the same line, China’s Securities Daily mentions, “China to roll out more comprehensive measures to cut taxes and fees by 500 billion yuan ($78.34 billion) or even higher in proper time.”

It should be noted, however, that looming concerns over Evergrande, as cited by the global rating agency S&P, may join the fears of the Fed rate hike to challenge the risk appetite should today’s Fedspeak fails to tame the policy hawks.

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