U.S. Treasury yields climbed on Monday, driven by growing expectations of further fiscal stimulus and its potential impact on inflation. The yield on the benchmark 10-year Treasury note rose to 1.30%, while the 30-year Treasury bond yield increased to 2.08%.

The rise in yields reflects investor anticipation of increased government spending and a stronger economic recovery, fueled by President Biden’s proposed infrastructure plan. This has led to concerns about potential inflationary pressures, prompting investors to demand higher returns on longer-term bonds.

Several factors are contributing to the upward pressure on yields:

• Stimulus Expectations: The prospect of additional fiscal stimulus is boosting economic growth forecasts, leading to higher inflation expectations.
• Economic Recovery: Positive economic data, including strong jobs reports and retail sales figures, are supporting the view that the economy is recovering strongly.
• Inflation Concerns: Investors are increasingly worried about the potential for inflation to rise above the Federal Reserve’s target of 2%.

The Federal Reserve has indicated that it will tolerate a period of above-target inflation to ensure a full economic recovery. However, some investors are concerned that the Fed may be forced to raise interest rates sooner than expected if inflation rises too quickly.

The bond market will continue to closely monitor economic data and policy announcements from the Federal Reserve for further clues about the future direction of interest rates and inflation.