Infrastructure Plans Fuel Treasury Yield Spike

Looking at the United States as a massive real estate asset is instructive. One could say that the American Society of Civil Engineers Report Card is our property condition report. The 2021 grade is “C-“ with special attention on public roadways, water systems, broadband capacity and the energy grid. A $2 trillion infrastructure plan is being discussed in Washington with uncertainty about how to pay for it. Bond markets are guessing that some increased deficit spending will be involved. The 10 year T bumped up to its recent high of 1.74%. The sell off in treasuries is largely based on the anticipation “inflation is coming, it has to be.” Last week’s PCE index (the Fed’s preferred inflation metric) came in at 1.3% annually. Other factors contributed such as fiscal year end selling of US Treasuries in Japan. The data: the next round of economic reports will tell the tale of the nascent recovery and may indicate signs of inflation. Last month’s reports were dragged down by the February storms that hit much of the country. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners