Clear break higher in 10-year yields
It may be awhile before we see US 10-year yields below 1% again. The bond market has been the clearest expression of the Democratic sweep in the Senate and with the rise above 1%, a key level has fallen.
How that reverberates through the rest of the market is key today. We're a bid in USD/JPY, which is a classic follow through.
For the US dollar, higher yields are bullish but it's a mixed bag because US spending doesn't necessarily draw in more dollars to the US, even if it results in better growth.
Bank of America is out with a note highlighting its initial takes on the results, saying infrastructure and green initiatives will be at the top of the agenda:
"We think the Dems would inject $2-4 trillion in deficit spending with much of it frontloaded within the 10-year budget window via reconciliation. This would provide upside risks to our 2H 2021 outlook on GDP growth and inflation."
