February 9, 2017 / 8:24 PM / 5 months ago

TREASURIES-Yields rise on optimism for Trump's tax plans

3 Min Read

* Trump says will make tax announcement in a few weeks
    * Yields climb from multi-week lows touched Wednesday
    * Longer-dated maturities lead selloff

 (Updates to afternoon trading; adds data, analyst comments,
auction result)
    By Sam Forgione and Dion Rabouin
    NEW YORK, Feb 9 (Reuters) - U.S. Treasury yields rose on
Thursday as optimism wrapped markets following comments from
President Donald Trump that he would reveal plans for U.S. tax
reform in the coming weeks. 
    Yields jumped from multi-week lows touched Wednesday after
Trump said during a meeting with airline executives that a major
tax announcement would be forthcoming in a matter of weeks.
 
    "We're going to be announcing something I would say over the
next two or three weeks that will be phenomenal in terms of tax
and developing our aviation infrastructure," Trump said on
Thursday.
     Sentiment among traders that the U.S. government bond
market may have rallied too much in recent days prompted further
selling on Thursday. Yields had fallen Wednesday as buyers
bought Treasuries partly on pessimism that Trump's fiscal
spending and tax reform plans might not pan out anytime soon.
    "The thrust that we've seen today is largely on the back of
the commentary regarding the timing of potential for tax reform,
which candidly caught the market a little bit by surprise," said
Bill Northey, chief investment officer at the Private Client
Group at U.S. Bank in Helena, Montana.
    "It has been one of the elements that has led to the animal
spirits being rekindled in the post-election period of time, but
seemed to be illusive on details."
    The market had largely come to expect that tax proposals
from the Trump administration would not come until later in the
year, leading to the selloff in riskier assets like U.S.
equities and buying of low-risk assets like Treasuries, Northey
added.
    U.S. 30-year yields fell to a three-week low of
2.945 percent Wednesday, while five-year yields 
touched a two-month low of 1.794 percent Wednesday. 
    Longer-dated yields, which are more sensitive to inflation
expectations, led the selloff on Thursday as investors expect
fiscal stimulus measures like tax cuts to drive inflation
higher.
    Benchmark 10-year notes fell 16/32 in price to
yield 2.393 percent, more than 5 basis points higher than their
late Wednesday levels.
    The 30-year bonds dropped 1-2/32 in price to yield 3.017
percent, also up more than 5 basis points from their levels on
Wednesday.
    Yields took little impact from the U.S. Treasury's auction
of $15 billion of 30-year bonds, which analysts said produced
generally solid but unremarkable demand, earlier in the day.

 (Reporting by Sam Forgione and Dion Rabouin; Editing by Andrea
Ricci)

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