Dow was off 41, advancers over decliners around 2-1 & NAZ crawled up 2. The MLP index went up 1+ to the 207s & the REIT index was off 4 to the 456 following recent strength. Junk bond funds did little & Treasuries saw some selling (more below). Oil was bid higher above 70 & gold fell 4 to 1882.
AMJ (Alerian MLP index tracking fund)
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A bipartisan group of 10 senators said it has reached a tentative agreement on a "realistic, compromise framework" for an infrastructure spending package. The announcement came after weeks of negotiations between the Biden administration & top GOP lawmakers. Pres Biden engaged with key members of the group in recent days after talks broke down with a separate group led by Sen Shelley Capito. "Our group – comprised of 10 Senators, 5 from each party – has worked in good faith and reached a bipartisan agreement on a realistic, compromise framework to modernize our nation’s infrastructure and energy technologies," the senators said. "This investment would be fully paid for and not include tax increases." "We are discussing our approach with our respective colleagues, and the White House, and remain optimistic that this can lay the groundwork to garner broad support from both parties and meet America’s infrastructure needs," they added. The agreement is largely focused on physical infrastructure projects & includes $579B in new spending, a source familiar with the deal's terms said. The plan would cost $974B over a 5-year span & $1.2T over 8 years. "The President appreciates the Senators’ work to advance critical investments we need to create good jobs, prepare for our clean energy future, and compete in the global economy," White House deputy press secretary Andrew Bates said. "Questions need to be addressed, particularly around the details of both policy and pay-fors, among other matters." "Senior White House staff and the Jobs Cabinet will work with the Senate group in the days ahead to get answers to those questions, as we also consult with other Members in both the House and the Senate on the path forward," he added.
Bipartisan group reaches agreement on infrastructure spending framework
The Federal Reserve's balance sheet topped $8T for the first time, weekly data published yesterday by the central bank on its holdings. The report also showed the Fed appears to have sold around $160M of its corp debt holdings since Mon, following the announcement it would unwind its nearly $14B corp credit portfolio. As a first step, the central bank began selling its stakes in 16 bond exchange-traded funds on Mon. The Fed's credit facility was just one of many emergency measures launched last spring to shore up financial markets badly shaken by the coronavirus pandemic's rapid spread & disruption to the economy. While the Fed's backstop restored liquidity to the credit market, the facility was ultimately little used & the sale of its holdings is not expected to have serious effects on the market.
Fed balance sheet tops $8 trillion for first time
Treasury yields held steady near recent lows as investors shrugged off the 5% annual jump in inflation reported in the previous session & appeared to buy the Federal Reserve's argument that the price increases will be temporary. The yield on the benchmark 10-year Treasury note was unchanged at 1.459% & the yield on the 30-year Treasury bond ticked down to 2.151%. Yields move inversely to prices. At one point today, the 10-year yield traded at 1.428%, its lowest level since Mar 3. The 30-year hit its lowest level since Feb 26. The core consumer price index rose 5% in May on a year-on-year basis, the highest since 2008 & above the 4.7% increase expected. Excluding food & energy, core CPI rose 3.8% year over year, the highest pace since 1992. A 3rd of the increase was attributed to a sharp 7.3% rise in used car & truck prices. Despite that, yields are down significantly from Mar, when the 10-year traded above 1.7% as the economic reopening gained steam. The benchmark yield was trading above 1.6% just a week ago. Fed officials, including chair Jay Powell, have repeatedly stressed that high inflation readings are to be expected in the in the spring & summer but will likely be transitory. The central bank has said it is willing to let inflation run above its traditional 2% target as the economy recovers from the pandemic.
10-year Treasury yield falls to 3-month low of 1.43% despite inflation fears
An agreement on the infrastructure at the opening brought out buyers, but that enthusiasm did not last. After all this is DC & changes can come quickly. The inflation data & Treasury borrowings should be getting more attention by investors.
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