Bassanese Bites: USA! USA! – April 06 2021
Global equities pushed on to new record highs last week as bond yields remained relatively well contained despite ongoing strong U.S. economic news. After harsh winter weather held back sections of the economy in February, early March U.S. economic data has been blisteringly strong. The U.S. ISM manufacturing index hit a 37-year high of 64.7 last month, while the March payrolls report blew away expectations, with 916k new jobs created and the unemployment rate dropping to 6.0%. U.S. President Biden also unveiled a US$2.2 trillion infrastructure package, though with this spending staggered over several years and planned to be financed by corporate tax increases. Overnight, the U.S. ISM service sector index was also very strong.
Despite all this strength, U.S. 10-year bond yields only tested recent highs, rising 5 basis points to 1.72%. The $US also remained firm as higher U.S. yields and its relatively strong economy enticed investors. Europe especially is still struggling with COVID outbreaks and lockdowns, its vaccine rollout has been slow, and the European Central Bank has indicated a greater preparedness to boost bond buying to containing rising bond yields if need be.