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TREASURIES-Yields fall as Trump scandals reduce fiscal stimulus hopes
May 17, 2017 / 1:43 PM / 5 months ago

TREASURIES-Yields fall as Trump scandals reduce fiscal stimulus hopes

    * Political concerns raise safety buying of bonds
    * Trump seen less likely to pass fiscal, tax policies

    By Karen Brettell
    NEW YORK, May 17 (Reuters) - U.S. Treasury yields fell to
three-week lows on concerns that scandals embroiling U.S.
President Donald Trump would delay his bid to cut taxes and
regulation and push through infrastructure spending, which
boosted demand for safe-haven bonds.
    Reports that Trump in February asked then-FBI Director James
Comey to end a probe into the president's former national
security adviser have stirred speculation that obstruction of
justice charges could be laid against Trump.             
    The White House has been in turmoil since last week when
Trump fired Comey and then discussed sensitive national security
information during a meeting with Russian officials.
    The scandals are seen as distracting lawmakers from passing
legislation that investors had hoped would help boost economic
growth.
    "The more focus there is on the headlines, the less there is
on the stuff that the market really cares about, which is fiscal
stimulus, tax reform, regulatory reform, any of those issues,"
said Aaron Kohli, an interest rate strategist at BMO Capital
Markets in New York.
    "Within a news cycle, where the constant din of scandal
keeps legislators from focusing on the actual matters at hand,
it becomes very hard to marshal support for big sweeping
changes," Kohli added.
    Benchmark 10-year notes             gained 20/32 in price to
yield 2.26 percent, the lowest level since April 25 and down
from 2.33 percent late on Tuesday. 
    The yield curve between two-year notes and 10-year notes
               flattened below 100 basis points for the first
time since May 3.
    Bonds have also been boosted in recent days by weakening
U.S. economic data, which has raised new doubts over whether the
Federal Reserve is likely to raise rates an additional two times
this year.
    Futures traders are pricing in a 69 percent chance of a June
hike, down from 88 percent a week ago, according to CME Group's
FedWatch Tool.
    Traders see only a 48 percent chance of the Fed raising
rates two or more times by the end of the year, even though Fed
officials have said two more rate hikes are likely in 2017.  

 (Editing by Paul Simao)
  
 
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