BOND REPORT: Treasury Yields Fall To 1-month Low As Trump's Agenda Seen Faltering
March 27 2017 - 4:19PM
Dow Jones News
By Joseph Adinolfi, MarketWatch , Sunny Oh
10-year yield on track for largest one-day drop in a month
Treasury yields tumbled to their lowest levels in a month Monday
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 3.7 basis points at
2.373%, its lowest level since Feb. 28. The yield on the 30-year
bond was off 2 basis points at 2.979%. The yield on the two-year
note was down 0.5 basis point at 1.253%.
Yields, which move inversely to prices, notched their largest
one-day drop in two weeks, after the Federal Reserve's perceived
reluctance to signal a faster pace of rate increases triggered an
aggressive rally in Treasurys.
Chicago Fed President Charles Evans, a voting member of the
Fed's interest-rate-setting committee this year, said on Monday
that the central bank could raise interest rates up to four times
this year if the economy "really takes off." His remarks seemed to
have had little impact on the market.
Treasury yields shot higher following Trump's Nov. 8 upset
victory as investors reasoned that, with Republicans in control of
both houses of Congress, a Trump administration would have little
trouble enacting 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 administration's other policy efforts.
Check out: These 5 charts show how Trump's health-bill flop is
hitting markets
(http://www.marketwatch.com/story/these-5-charts-show-how-trumps-health-care-flop-is-hitting-markets-2017-03-27)
"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.
Read: Trump tax-cut trade was leaking air before health-care
debacle, chart shows
(http://www.marketwatch.com/story/investors-are-scaling-back-corporate-tax-cut-hopes-in-one-chart-2017-03-27)
The ICE U.S. Dollar Index was off 0.6 % at 99.204 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.
An auction of $24 billion in two-year Treasury notes received
strong demand, with investors paying a slight premium for notes
sold at the auction. Strong Treasury auctions tend to influence the
yields in outstanding Treasury notes, pushing them lower.
Also read: Here's why financial markets are obsessed with the
health-care vote
(http://www.marketwatch.com/story/what-traders-are-watching-as-health-care-vote-looms-2017-03-23)
(END) Dow Jones Newswires
March 27, 2017 16:04 ET (20:04 GMT)
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