BOND REPORT: 30-year Treasury Yield Posts Largest Single-day Climb In 5 Weeks As Tax Bill Nears Passage
December 18 2017 - 5:18PM
Dow Jones News
By Sunny Oh
Long-dated yields rose, while short-dated yields fell, on Monday
amid mounting expectations that Congress will pass tax-cut
legislation this week.
How are Treasurys doing?
The 30-year bond yield rose 5.9 basis points to 2.745%, marking
its largest one-day gain since Nov. 10. The 10-year note yield rose
3.9 basis points to 2.392%. The 2-year note yield ticked lower 0.8
basis point to 1.832%.
Bond prices move in the opposite direction of yields.
What's moving markets?
The House and Senate are expected to vote on the tax bill this
week after spending the past month working out differences between
competing versions of the legislation and persuading holdout
senators to support the final bill. Analysts have highlighted the
bill's potential impact on yields. A deficit-widening tax cut would
push the federal government to increase debt issuance, boosting the
supply of Treasurys and potentially weighing on prices.
See: Mnuchin says 'no doubt' Congress will pass tax bill this
week
(http://www.marketwatch.com/story/mnuchin-says-no-doubt-congress-will-pass-tax-bill-this-week-2017-12-17)
Investors also fearing the inflationary impact of the bill sold
long-dated bonds and bought short-dated debt, steepening the
so-called yield curve. The curve is a line mapping out a bond's
yields across its maturities and can serve as a gauge of growth
expectations. But some traders said the bond market was taking a
breather from a long running flattening trend, and the steepening
would be short-lived.
What did market participants say?
"I don't think it's anything more than the fact that we got
overextended on the flattening trade. We're trying to give some of
that back. It's been pretty relentless," said Tom di Galoma,
managing director for Treasurys trading at Seaport Global
Securities.
What else is on investors' radar?
The National Association of Home Builders reported the housing
market index for December rose to 74
(http://www.marketwatch.com/story/home-builder-confidence-roars-to-an-18-year-high-2017-12-18),
from 69 in the previous month. This marks the strongest reading
since 1999.
Minneapolis Fed President Neel Kashkari highlighted his concerns
(https://medium.com/@neelkashkari/why-i-dissented-a-third-time-fccbdf0f16)that
a flattening yield curve could augur a potential recession.
Read: Why the yield curve flattening--a recession red flag--is
the 'real deal'
(http://www.marketwatch.com/story/why-the-yield-curve-flattening-is-the-real-deal-2017-12-15)
What other assets are on the move?
The German 10-year government bond yield was flat at 0.307%.
While, the U.K. 10-year bond yield fell a basis point to
1.145%.
(END) Dow Jones Newswires
December 18, 2017 17:03 ET (22:03 GMT)
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