U.S. bond yields fall as Biden's stimulus efforts off the rocks

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10-year U.S. debt yield is lowest since May :

NEW YORK LONDON, June 9 - World stocks rose near record highs and U.S. bond yields fell on Wednesday as some of the U.S. president Joseph Biden’s stimulus efforts appeared to be off the rocks, increasing the appeal of technology stocks as future inflation pressures ease.

A little observed ruling by the Senate Assembly Member in late May said Democrats can only use reconciliation once in a fiscal year to circumvent legislation that requires 60 votes.

The official fiscal packages in Congress are rapidly shrinking, leading to a net outcome that inflationary pressures are likely to recede, said Sebastien Galy, Senior macro strategist at Nordea Asset Management.

The yield on benchmark 10-year U.S. Treasury notes fell 3.2 basis points to 1.4958% on Tuesday, down from 1.528% on the previous day.

Yields plunged as traders were forced in part to unwind Short positions in Treasuries, said Joe LaVorgna, chief economist of Americas at Natixis.

Besides this, the economy is at its peak growth and a lot of what the administration wants in terms of fiscal stimulus might not be met because of the parlamentar ruling, LaVorgna said.

MicrosoftCI’s all-country world index, a global benchmark for U.S. equity markets, rose on Tuesday to 717.04, down a little more than 1 point from a record high.

On Wall Street, the S&P 500 traded less than 10 points from its all time high as big tech used to rally with healthcare stocks along with largest stocks.

The Dow Jones Industrial Average increased 0.11%, the Nasdaq Composite was 0.15% and the S&P 500 added 0.27%.

Attention remained focused on Thursday's publication of European consumer prices and a European central bank meeting that could indicate how soon policymakers will begin to withdraw support for Europe's economy as the COVID-19 crisis ebbs.

The pan-regional STOXX Europe 600Europe 600 index was 0.1% lower, with Britain's FTSE trading up 0.2% as US-listed miners collapsing under pressure from the lower price of base metals.

Overnight in Japan, the broadest index of Asia-Pacific shares was 0.4% lower than the MSCI index of Japan, as did Japans Nikkei average.

The bund yield of Germany, which is closely correlated with U.S. Treasuries, on Tuesday extended the decline by 0.253%, the lowest since late April, as investors continued to rate in a dovish outcome to the Thursday policy meeting of the ECB.

As the recovery on the job market is under control, any discussion at the Fed on tapering is unlikely to gain momentum, even if it starts soon, said Naokazu Koshimizu, senior rate strategist at Nomura Securities.

I was surprised that U.S. payroll data on Friday showed hiring is slower than economists were expecting despite increasing signs of a labor shortage.

Many analysts say that increasing evidence of strong jobs growth is required for the Federal Reserve, which has repeatedly said a jump in inflation this quarter would be transitory to strengthen taper talk.

Forget the overall annual inflation rate of 4.7% when the third official release from the Fed is expected to show the United States consumer price data on Thursday, which worries investors who don't fully consider the transitory narrative.

The CPI data is unlikely to settle questions about the future trajectory of inflation, said James Athey, investment director at Aberdeen Standard Investments.

I think there is thus potential for a higher print to push longer-dated yields and real yields that might flatten the curve, noting that they are supporting the dollar, said Athey.

This may not be a great environment for risky assets.

The China Inflation data showed its producer price index from a year earlier, the highest in over 12 years, on rising commodity prices rose 9.0%.

However, the rise in consumer prices was more conservative than expected, helping to mitigate fears. While China's central bank has been steadily scaling back the pandemic stimulus, top leaders have vowed to avoid any sharp policy changes and keep borrowing costs low.

The Chinese yuan, whose rally to a three-year high last week was due in part to speculation that Beijing may want a stronger yuan to combat inflationary pressure, has climbed slightly to 6.3869 per dollar.

The dollar held at the lower end of recent gains, with the currency index dropping at 90.031 slightly.

The dollar edged higher to $1.2194 while the euro increased to 109.58 yen.

Deutsche Bank's Currency Volatility Index hit its lowest level since February 2020 on Tuesday, and fell even further on Wednesday.

The oil prices continued to rally on signs of strong fuel demand in western economies.

Brent crude futures jumped $3.50 to $72.57 a barrel. U.S. crude futures have gained $0.26 up to $70.31 a barrel.

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