BOND REPORT: Treasury Yields Inch Higher As Tax Bill Set For Unveiling
December 15 2017 - 9:10AM
Dow Jones News
By Sunny Oh
Treasury yields were subdued on Friday as investors awaited the
final version of the Republican tax bill, which is set for
unveiling later in the day.
What are Treasurys doing?
The 10-year benchmark Treasury yield rose to 2.357%, from 2.346%
on late Thursday. The 2-year note yield ticked higher to 1.824%,
versus 1.811%. The 30-year bond yield was flat at 2.710%.
Bond prices move in the opposite direction of yields.
What's driving markets?
Investors watched the progress of the tax bill. Republican
lawmakers are expected to unveil the final bill on Friday and vote
next week so it can be passed by the end of the year. But even as
the tax cuts come closer to fruition, bond markets have been tame
compared with the earlier selloff seen during President Donald
Trump's election victory a year ago, when expectation for
pro-growth fiscal policy catapulted long-term bond yields.
Analysts nonetheless have shown trepidation over the bill's
impact on government bond rates. A deficit-widening tax cut would
push the federal government to increase debt issuance, a move that
would introduce competing debt on to the market, undercutting
demand for exiting issues.
What did strategist say?
"Interest rates also seem underwhelmed by the 2018 impact of the
tax bill. Whatever grade you assign to the end result, the bond
market and economists are adding an extra 'minus' to the grade. So,
if you think it's a B effort, the market's grade is a B minus. Rate
trajectory is well below what we charted for getting this close to
the goal line, partly due to the Byzantine compromises traded in
exchange for something that resembles revenue neutrality versus a
10-year measuring period," said Jim Vogel, an interest-rate
strategist at FTN Financial.
What else is on investors' radar?
Industrial production data for November is set to come out at
9:15 a.m. Eastern. Economists surveyed by MarketWatch are
forecasting an 0.4% gain. The Empire State manufacturing index, a
gauge of local economic activity, slipped to 18.
What other assets are on the move?
Portuguese bond yields fell on anticipation that Fitch Ratings
would upgrade the country's bonds, lifting it to investment-grade
status. This follows S&P Global's decision to raise the
country's rating out of so-called junk level on Sep. 15. The
10-year Portuguese bond yield fell 5.4 basis points to 1.759%.
(END) Dow Jones Newswires
December 15, 2017 08:55 ET (13:55 GMT)
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