NEW YORK, March 29 (Reuters) - Longer-dated Treasury yields rose on Monday, steepening the yield curve, on investor optimism about the rollout of coronavirus vaccines in the United States and expectations that President Joe Biden’s infrastructure initiative could bolster economic growth and debt issuance.
Benchmark 10-year yields rose to a session high of 1.728% after the state of New York on Monday afternoon announced that people aged 30 and older would be eligible for coronavirus vaccinations from March 30.
That widened the spread between two- and 10-year yields , the most common measure of the yield curve, to 157.9 basis points, the highest in a week.
The two-year yield has remained anchored, even with expectations of an increase in Treasury issuance, because it moves with views on interest rates.
The Federal Reserve has pledged to keep rates near-zero until the employment situation in the United States improves dramatically. Fed Governor Christopher Waller said on Monday that the central bank is “a long way from raising interest rates at this point.”
The expansion of eligibility in New York mirrors a ramp-up in vaccination efforts nationwide as COVID-19 cases increase. Biden said on Monday that 90% of adults in the United States will be eligible to get a vaccine by April 19.
The jump in the 10-year yield on Monday suggested to some investors that the 1.75% peak hit two weeks ago may soon be breached.
Monday’s move “undermines the prospects for 1.75% to represent the upper-bound for now; frankly, it even introduces the possibility the pandemic peak doesn’t survive as the Q1 line in the sand,” wrote Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.
“It will be an area to monitor as reopening optimism has been extended with Biden’s announcement that 90% of U.S. adults will be eligible for the vaccine by April 19,” said Lyngen.
Also pushing yields higher was the expected announcement of Biden’s multitrillion infrastructure spending plan on Wednesday in Pittsburgh, Pennsylvania.
“There’s a lot of apprehension about what President Biden is going to announce on Wednesday and whether that will push up deficits materially in the years to come. That, I think, is weighing on markets,” said Gennadiy Goldberg, senior U.S. rates strategist at TD Securities.
The Treasury market on Monday was little moved by the fallout from losses at Archegos Capital Management, which triggered a fire sale of stocks on Friday.
“The hedge fund issue ... you wouldn’t typically have rates selling off into that, you’d have a flight to safety because people would be closing out their equity positions,” Goldberg said. (Reporting by Kate Duguid; Editing by Will Dunham)