BOND REPORT: Treasury Yields Hover Near 2-week Highs Ahead Of Trump Tax Plan
April 26 2017 - 9:28AM
Dow Jones News
By Sunny Oh
Treasury yields showed little change as investors look ahead to
President Donald Trump's plans for a corporate tax cut which could
give a further boost to stocks and other assets perceived as risky
and, in turn, curtailing appetite for havens like government
bonds.
The yield on the 10-year Treasury note edged off 0.5 basis point
to 2.328%, after earlier pushing above important chart resistance
at 2.32%. Bond prices move in the opposite direction of yields.
Yields for the 2-year note held at 1.286%, while yields for the
30-year bond fell a 0.5 basis point to 2.984%.
Bond prices move in the opposite direction as yields; one basis
point is one hundredth of a percentage point.
Investors are waiting for Trump to roll out his tax package on
Wednesday. Sources within the new administration have suggested he
will lower the corporate tax rate from 35% for the top payer to
15%. Though corporations blame the onerous tax regime for crimping
growth and discouraging the repatriation of profits, many do not
pay the full headline tax rate through deductions and credits.
Stocks and assets perceived as risky have been on a strong
streak after Trump said he planned to present a tax reform bill.
Investors hope a jump in corporate earnings will justify or
translate into higher stock prices after his election. The Nasdaq
Composite Index broke through 6,000 to reach a record high on
Tuesday.
"The "tax code rally" doesn't have the same ring to it, however,
an aggressive cut to the tax rate could be a key driver for stocks
going forward, as long as the plan is not watered down by Congress
in the legislative phase," said Kathleen Brooks, research director
at City Index, in a note.
But bond markets have displayed a distrust of Trump's ability to
reach across the aisle and carry out major fiscal reforms. Though
Treasury yields have risen over the last few days, they are still a
far cry away from 2.60%, their highest levels during the early days
of Trump's presidency.
See: Trump's 15% corporate tax rate could cost the government $2
trillion
(http://www.marketwatch.com/story/trumps-15-corporate-tax-rate-could-cost-the-government-2-trillion-2017-04-25)
The Treasury Department will hold a $34 billion auction of
5-year notes. Auctions of U.S. government paper can impact yields
and prices of Treasurys for the outstanding market.
The Commerce Department will announce revisions to retail sales
for March. Recently, falling consumer spending at shops has added
fuel to the concern that the economy will fail to grow at a
sufficient pace to push up inflation and ensure the Federal Reserve
will keep to its schedule of two more rate hikes this year.
See: Retail sales post worst two month stretch in two years
(http://www.marketwatch.com/story/retail-sales-post-worst-two-month-stretch-in-two-year-2017-04-14)
(END) Dow Jones Newswires
April 26, 2017 09:13 ET (13:13 GMT)
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