$2 Trillion It Is?

Market participants were poised to focus on Joe Biden’s economic plan Thursday.

A report, from CNN, that Biden’s team intended to “shoot for the moon” right out of the gate seemed to conflict (if only a bit) with other reporting that suggested Biden would move to secure bipartisan support for an initial virus relief package, while saving the “moon shots” for infrastructure and a broader stimulus push to be delivered later.

While Chuck Schumer apparently floated a $1.3 trillion price tag for more virus relief (enough to effectively bridge the gap between the $900 billion bill that just passed and the “updated” Heroes Act from October which would have cost $2.2 trillion), CNN, citing people briefed on the plans, said Biden’s “advisers have recently told allies in Congress to expect a price tag in the ballpark of $2 trillion.”

“The proposal will include sizable direct payments to American families, significant state and local funding — including for coronavirus vaccine distribution and other emergency spending measures — to help those struggling during the pandemic,” CNN went on to say.

That moved markets a bit, pushing Treasury yields higher, even as the last two days seemed to suggest that the bond selloff may have run its course in the near-term.

Read more: Of Bonds And Bernie

“If the series of bearish events seen since January 6 cannot get 10s to 1.25%, then what will it take?,” BMO’s Ian Lyngen and Ben Jeffery wondered, on Wednesday afternoon. “Greater stimulus than already anticipated seems a bit of a stretch given the narrow majority the Democrats currently hold,” they added, noting that “where, how much, and how long before it impacts the real economy are the essential questions that will be asked of lawmakers and market pundits; although the answers will undoubtedly take longer to materialize and be less concise than investors would like to see.”

“[$2 trillion] is a big price tag but it’s likely to be watered down as it works its way through Congress,” AxiCorp’s Stephen Innes remarked Thursday.

There’s still something like broad support for $2,000 stimulus checks. Or is it $1,400 stimulus checks? I’m honestly not sure. I assume the $600 checks authorized under the last stimulus bill were distributed, so Biden would just backfill the other $1,400.

CNN noted that Brian Deese, Biden’s National Economic Council lead, “said Wednesday at a conference that the package will include $2,000 checks, and address other relief measures like unemployment insurance.” Bloomberg flagged a letter from Marco Rubio who told Biden that $2,000 checks “would send a powerful message to the American people” following the melee on Capitol Hill last week.

How’s that for papering over the cracks? (Worried about the insurrection? Here’s another $1,400. Feel better now? Oh, and did you get that $600 from Steve Mnuchin or no? If not, here’s a number you can call. Ask for “Janet,” though. Steve is no longer with the company.)

Certainly, more funding for vaccine distribution and virus containment efforts would be welcome. Tuesday was the deadliest day yet for the US on the virus front. 4,327 people died that day, according to Johns Hopkins. CDC’s data is a bit different, but the point is the same. America is losing more than 4,000 people on some days to COVID.

Hospitalizations have stabilized over the past two weeks, but “stable” is a relative term. Around 130,000 people nationwide are hospitalized with the virus.

In any event, the Biden plan, if it does carry a price tag of $2 trillion, will perhaps embolden Treasury bears anew, and it could potentially extend the pro-cyclical rotation in equities which some suggested may be running low on fuel.

SocGen’s Kit Juckes summed things up pretty succinctly on Thursday. “Bonds remain the dominant market, but with the Biden announcement ahead of us, the first impression is that the 3-part refunding auctions have done their job,” he wrote, adding that “10-year note yields started the week at 1.1%, rose to 1.19% and are now back at 1.1% [and] if we can settle into a 1.05-1.15% range, say, I think that’s enough to calm fears that bonds are going to wreck market sentiment, or give the dollar a meaningful bid.”