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Home>UPDATE: 10-year Treasury yield jumps most in six months as details of tax reform emerge

UPDATE: 10-year Treasury yield jumps most in six months as details of tax reform emerge

UPDATE: 10-year Treasury yield jumps most in six months as details of tax reform emerge

09/28/2017

By Mark DeCambre, MarketWatch , Sunny Oh

10- and 30-year Treasury yields are up more than 8 basis points

U.S. Treasury prices retreated further on Wednesday, driving yields higher, after the White House unveiled further details of its plan to overhaul the tax code, reviving the so-called reflation trade that was underpinned by hopes that President Donald Trump's fiscal agenda would stoke inflation pressures.

Investors also sold their holdings of government paper after Federal Reserve Chairwoman Janet Yellen on Tuesday outlined the Fed's reasoning for an additional rate increase this year. Fed funds futures traders are pricing close to an 80% chance of another rate increase in 2017, compared with about 38% a month ago, according to CME Group data (http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html).

What are bond yields doing?

Long-dated bonds led the action, with the 10-year note yield and the 30-year bond yield posting their biggest one day jump since March. 1. The 10-year Treasury yield climbed 8 basis points to 2.309%. Likewise, the 30-year bond yield added 9.2 basis points to 2.862%. The 2-year Treasury note yield, which is more sensitive to shifts in rate expectations, rose 2.8 basis points to 1.483%, its highest since Oct. 2008. Yields and bond prices move in opposite directions.

In Europe, the German 10-year government bond took a cue from the U.S., rising more than 6 basis points to hit 0.466%. Part of the move was driven by reports that German Finance minister Wolfgang Schäuble would leave his position (http://www.marketwatch.com/story/german-finance-minister-to-become-parliamentary-president-2017-09-27) to become the next president of the country's parliamentary body. He has been a critic of the European Central Bank's loose monetary policy.

What else is the market anticipating?

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