BOND REPORT: Treasury Yields Fall To 1-month Low As Trump's Agenda Seen Faltering
March 27 2017 - 9:42AM
Dow Jones News
By Joseph Adinolfi, MarketWatch
10-year yield on track for largest one-day drop in a month
Treasury yields tumbled Monday to their lowest levels in a month
after President Donald Trump capitulated to a fractious Republican
caucus by withdrawing his proposal to repeal and replace
Obamacare.
The yield on the 10-year note was off five basis points at
2.363%, its lowest level since Feb. 28. The yield on the 30-year
bond was off four basis points at 2.984%. The yield on the two-year
note was down 2.4 basis point at 1.236%.
If yields, which move inversely to prices, end the day at these
levels, it would mark the largest one-day drop in two weeks, when
the Federal Reserve's perceived reluctance to signal a faster pace
of rate increases triggered an aggressive rally in Treasurys.
Treasury yields shot higher following Trump's Nov. 8 upset
victory as investors reasoned that, with Republicans in control of
each house of Congress, the Trump administration would have little
trouble enacted the purportedly pro-growth fiscal policies he had
campaigned on -- including corporate tax cuts, deregulation and
infrastructure spending.
But the defeat of health care, Trump's first major legislative
push, has forced investors to rethink these assumptions as
divisions between conservative and centrist Republicans threaten to
stymie the administrations' other policy efforts.
"The failure of Trump's health-care legislation imperils the
other pro-business aspects of his agenda," said Guy LeBas, chief
fixed income strategist at Janney Capital Markets.
Another factor weighing on yields is the weakening dollar, which
has made U.S. debt more attractive to foreign buyers like Japanese
insurance companies and Swiss asset managers, LeBas said. U.S.
yields are higher relative to their European and Japanese
counterparts.
The ICE U.S. Dollar Index was off 0.7% at 98.9550 in recent
trade, its lowest level since November.
"Part of this reflects the concept that the marginal buyer of
U.S. Treasury notes lives overseas," LeBas said.
Investor are also looking ahead to an auction of $24 billion in
two-year Treasury notes, set for 1 p.m. Eastern Time.
Aaron Kohli, a fixed-income strategists at BMO Capital Markets,
said he expects these notes to sell at a discount to their relative
market price as two more Fed interest-rate hikes this year appear
likely.
(END) Dow Jones Newswires
March 27, 2017 09:27 ET (13:27 GMT)
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