BOND REPORT: Treasury Yields Climb As Tax Cuts Return To Agenda
By Sunny Oh
Treasury prices fell slightly on Thursday, nudging yields higher, after the House of Representatives passed a budget resolution seen as a necessary step toward enacting tax cuts (http://www.marketwatch.com/story/house-takes-step-toward-major-tax-bill-by-passing-budget-resolution-2017-10-05).
What did Treasury yields do?
The 10-year Treasury yield rose 2 basis points to 2.352% from 2.332% on late Wednesday, according to WSJ Market Data Group. The 2-year Treasury note yield rose 2 basis points to 1.495%, versus 1.479%. The 30-year Treasury bond yield added a basis point to 2.893%, from 2.878%. Bond prices move inversely to yields.
What is driving markets?
Read:Pocket guide to Trump's candidates for top Fed spot (http://www.marketwatch.com/story/pocket-guide-to-trumps-candidates-for-top-fed-spot-2017-10-05)
Tax cut hopes stoked appetite for stocks and other assets perceived as risky at the expense of Treasurys. The House passed a $4.1 trillion budget in the afternoon, which analysts said may lead to a revamp of the U.S. tax code. The reflation trade hinges on the ability of President Donald Trump's pro-growth agenda to boost growth and inflation, which wears away the worth of bond's fixed-interest payments.
Investors are also bracing for labor-market data on Friday that could help guide the Federal Reserve's policy plans and influence trading in government paper. Market participants grappled with concerns that a Catalan independence vote (http://www.marketwatch.com/story/european-stocks-trade-mixed-as-investors-absorb-catalonia-developments-2017-10-05) could stir further trouble for Spain and the viability of the European Union, as analysts say it could encourage other regional separatist movements to seek a divorce from other eurozone member nations.