May 2021 – Bond Market Review

We believe accommodative monetary policy, robust fiscal spending, and continued progress on vaccine distribution will provide meaningful tailwinds for the economy in the coming quarters. The COVID-19 vaccine rollout continues and nearly 60% of the US adult population has had at least one dose. Restaurant and bar sales accelerated in March and travel-related spending has started to rebound as the economy reopens. Overall, economic data has been largely better than expected. Meanwhile, the Biden administration continues to push forward with large-scale fiscal spending proposals. President Biden recently proposed plans for more than $4 trillion in new fiscal spending, which would be in addition to the roughly $5.5 trillion in pandemic-related fiscal spending that has already been approved since early last year. In addition, the Fed has indicated that it plans to keep the fed funds rate near zero until at least 2023. Estimates for US gross domestic product (GDP) growth this year are strong. The current Bloomberg consensus estimate for 2021 US GDP growth is 6.3%.

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