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Illustration: Sarah Grillo/Axios

Long-dated U.S. Treasury yields jumped on Tuesday, as momentum pushed bond investors to sell and join the risk-on party in financial markets.

Why it matters: Bond investors have largely been incredulous about the prospects for U.S. growth and inflation — but recent good news on COVID-19 vaccines, global manufacturing data and U.S. holiday retail sales helped push yields on the 10-year Treasury note up by the most in nearly a month.

By the numbers: Yields on the 10-year jumped by more than 9 basis points to 0.938%, the highest since Nov. 12, and the spread between 2-year and 10-year yields widened to the largest since Nov. 12.

  • Yields on the 10-year are now knocking on the door of 1%, a level not seen since March.
  • Breakeven rates for 10-year Treasury Inflation Protected Securities (TIPS) reached 1.82%, the highest since May 2019.

What we're hearing: Investors are finally starting to take their money out of safe-haven Treasuries and move consistently into equities and some areas of the market that previously had been deemed too risky, Ellis Phifer, market strategist at Raymond James, tells Axios.

  • "Europe and EM have been beaten up a lot and that’s where the money starts going, where people feel they can put a little risk back out there."
  • "It’s hard to get too excited but we did see some rotation that is pretty significant into more risky assets from the bond market."

Watch this space: The Institute of International Finance estimates that emerging market securities attracted around $76.5 billion in November, more than triple the $23.5 billion fund flow in October.

  • "As a result, Q4 2020 is likely to be the strongest quarter for EM inflows since Q1 2013, i.e. since just before the 'taper tantrum,'" IIF economist Jonathan Fortun said in a report.

Don't sleep: More Wall Street analysts are jumping on the bull bandwagon. Barclays released a cadre of late-night notes to clients Tuesday touting their expectations for equity prices to continue higher.

  • "We remain overweight risk assets over core bonds, as investors look through the near-term drag of the winter COVID surge and focus instead on a resilient global economy and a faster return to normalcy in 2021," Barclays analysts said.
  • They project a "drift higher in core fixed income yields, and for emerging markets to do well."

The bottom line: Even with rising COVID-19 diagnoses and continued uncertainty about fiscal stimulus (Senate Majority Leader Mitch McConnell rejected a proposed bipartisan coronavirus stimulus package yesterday), Wall Street looks to be all-in on risk right now.

Go deeper

Dion Rabouin, author of Markets
Jan 28, 2021 - Economy & Business

How GameStop exposed the market

Illustration: Eniola Odetunde/Axios

Retail traders have found a cheat code for the stock market, and barring some major action from regulatory authorities or a massive turn in their favored companies, they're going to keep using it to score "tendies" and turn Wall Street on its head.

What's happening: The share prices of companies like GameStop are rocketing higher, based largely on the social media organizing of a 3-million strong group of Redditors who are eagerly piling into companies that big hedge funds are short selling, or betting will fall in price.

Felix Salmon, author of Capital
Jan 28, 2021 - Economy & Business

Where global investment is flowing

Data: UNCTAD; Chart: Axios Visuals

Cross-border investment fell off a cliff in 2020, dropping 42% to $859 billion from 2019's $1.5 trillion, according to official UN figures.

By the numbers: Developed countries saw a 69% reduction in inflows.

Felix Salmon, author of Capital
6 mins ago - Economy & Business

Why it's so hard to tax wealth

Illustration: Sarah Grillo/Axios

The wealth tax that wasn't a wealth tax isn't even a tax, now. The Democrats had a meticulously constructed 107-page proposal to pay for a large chunk of their spending plans with a tax on billionaires, but it died ignobly on Wednesday, the same day it was unveiled.

Why it matters: The dream of a wealth tax will never die as it so neatly generates revenue by reducing inequality. But there are three main reasons why that dream is likely to remain just a dream for the foreseeable future.