April 27, 2017 / 3:24 PM / 7 months ago

TREASURIES-Prices edge higher as U.S., global uncertainty weighs

    By Gertrude Chavez-Dreyfuss
    NEW YORK, April 27 (Reuters) - U.S. Treasury prices rose on
Thursday on steady demand for government bonds following the
announcement of President Donald Trump's unimpressive tax plan
and on persistent uncertainty over French elections and tensions
in North Korea and Syria.
    Analysts said expected month-end changes to portfolio
benchmarks had also supported long-dated Treasuries. 
    "Trump is having difficulty getting his agenda done. He
hasn't been able to do what people expected him to do for the
first hundred days," said Tom di Galoma, managing director at
Seaport Global in New York.
    Trump on Wednesday unveiled a one-page plan proposing deep
tax cuts, many for businesses, that would make the federal
deficit balloon if enacted, far short of comprehensive reforms
both parties in Washington have sought for years.             
    "The announcement on taxes by the Trump administration does
not change our forecast that only modest tax cuts will
eventually be passed with little tax reform," said Mark Doms,
senior economist and managing director at Nomura in Washington.
    "Congress will have little appetite to increase the deficit
and debt significantly, especially given the bleak fiscal
outlook," he added.
    In late morning trading, benchmark 10-year notes            
were up 5/32 in price to yield 2.292 percent, compared with
2.311 percent late on Wednesday.
    U.S. 30-year bond prices             rose 5/32, yielding
2.961 percent, down from Wednesday's 2.97 percent.
    "Certainly, global uncertainty has supported the market,"
said Seaport's di Galoma. "We have the French election, which is
far from certain and then we have North Korea and Syria."
    On the front end, U.S. two-year yields were at 1.269 percent
          , from Wednesday's 1.278 percent.
    The market is also awaiting the U.S. Treasury's $28-billion,
7-year note auction, coming off a tepid 5-year note sale on
    "We remain slightly constructive on the 7-year takedown,"
said Nomura Securities in a research note. "The likelihood of a
government shutdown next week as well as some disappointment on
the tax reform announcement could boost some duration demand."
    The note's valuation, though, has been unattractive,
analysts said, partly a result of the political headlines which
have driven rates lower and brought a risk-off tone that has
benefited U.S. five- and seven-year debt. 
    Ahead of the auction, U.S. 7-year notes were up 3/32 in
price, yielding 2.098 percent           , down from 2.115
percent late on Wednesday.

 (Editing by James Dalgleish)

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