(Bloomberg) — The benchmark 10-year Treasury yield headed for its biggest weekly increase since March as reflation trades regained appeal after U.S. President Biden sealed a $579 billion bipartisan infrastructure deal with legislators.

The rate rose as much as five basis points above 1.54% in New York trading Friday, and was 10 basis points higher on the week. Other drivers of the move included a deeper, supply-driven selloff in European government bonds and expectations that next week’s corporate new-issue calendar will entail selling of Treasuries as a hedge.

The yield curve steepened, extending its rebound from the powerful flattening trend unleashed by Federal Reserve forecasts released June 16 that suggested an earlier possible start to monetary tightening. The difference between five- and 30-year Treasury yields increased to nearly 124 basis points. It fell below 108 basis points on June 21, the smallest spread since August.

The curve is overcoming its tendency to flatten into month-end, when index rebalancing can create demand for duration, particularly when, as this month, there are no coupon auctions in the days leading up to it.

“The weakness in the long end is a bit surprising, with month-end duration extension on the way next week,” said Thomas Roth, head of rates trading at SMBC Nikko Securities. The improved odds for an infrastructure package appear to be leading to “reflation trades being put back on.”

(Updates levels throughout.)

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