April 26, 2017 / 7:38 PM / in 6 months

TREASURIES-Prices edge higher as Trump tax reform falls flat

 (Updates prices, adds comment)
    * U.S. tax reform calls for corporate tax cuts
    * U.S. 5-year note auction shows weak demand

    By Gertrude Chavez-Dreyfuss
    NEW YORK, April 26 (Reuters) - U.S. Treasury prices rose on
Wednesday, reversing steep losses sustained the last few
sessions, as President Donald Trump unveiled a tax reform plan
that largely underwhelmed the market.
    Details of the tax overhaul package have come out all week,
limiting any positive upside surprise from the announcement.
    On Wednesday, Trump proposed slashing tax rates for
businesses and on overseas corporate profits returned to the
country. He also called for raising standard deductions for
individuals, repealing inheritance taxes on estates and
simplifying tax returns.             
    With the tax package largely in line with expectations,
investors were focused on whether the reforms would push through
following an earlier failure on healthcare legislation. 
    "It was more a set of bullet points than a plan. The market
right now is a little bit unimpressed mainly because there's so
much that needs to be worked out, and the bottom line is that
the news article you're writing right now is longer than the
plan," said Michael O'Rourke, chief market strategist at Jones
Trading in Greenwich, Connecticut.
    "The market is in a wait-and-see mode, to see how progress
develops. Most market participants are pretty confident the
reality is going to be different to this plan."
    Bond investors were unimpressed by a lackluster U.S. 5-year
note auction, which showed weak demand with a soft bid-to-cover
ratio of 2.34. That was lower than last month's 2.37, as well as
the 2.43 average. 
    The yield for the note was at 1.875 percent, higher than the
expected yield at the bid deadline.
    Indirect bidding, mostly foreign central banks, came in at
57.3 percent, lower than the 68.9 percent level last month and
the 62.7 percent average.             
    "We see this auction more a result of a lack of cheapening
in the lead-up to the auction rather than a statement on overall
Treasury demand," said  Aaron Kohli, rates strategist at BMO
Capital Markets in New York.
    In late trading, benchmark 10-year notes             rose
4/32 in price to yield 2.312 percent, down from 2.329 percent
late on Tuesday. Yields hit a fresh two-week high of 2.35
percent earlier.
    U.S. 30-year bond             prices were up 5/32 in price,
yielding 2.971 percent, down from Tuesday's 2.979 percent.
    Post auction, U.S. five-year notes yielded 1.834 percent
          , down from 1.85 percent late on Tuesday.

 (Additional reporting by Sinead Carew; Editing by James
Dalgleish and Meredith Mazzilli)
  
 
 

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