U.S. Government Bonds Advance as Tax Plan Details Emerge

By Daniel Kruger Features Dow Jones Newswires

U.S. government bonds gained Thursday as investors assessed the impact of emerging details of a Republican plan to overhaul the U.S. tax code.

Continue Reading Below

The benchmark Treasury 10-year note yield fell to 2.349%, according to Tradeweb, from 2.378% Wednesday. Bond yields fall as prices rise.

The plan would slice the top corporate tax rate to 20% from 35% while leaving the top bracket for individuals at 39.6%. The plan would also reduce some popular individual deductions, including for mortgage interest, and impose limits on the deduction of corporate bond interest, which may help restrain the growth of budget shortfalls in future years.

Bond yields had risen last week as investors speculated that Republicans would propose measures that were more stimulative to the economy, and which would lead to significantly larger budget deficits.

"The tax package is a lot weaker than people expected," said Andrew Brenner, head of global fixed income at National Alliance Capital Markets. "They're trying to get the out-year deficits down, and the Treasury market is responding positively."

Yields were also pushed lower as U.K. government bonds rallied after the Bank of England raised interest rates for the first time since the financial crisis, and as investors prepared for the expected nomination of Federal Reserve Board Gov. Jerome Powell to become the central bank's next chairman.

Continue Reading Below

Mr. Powell is viewed by investors as representing a continuation of Fed Chairwoman Janet Yellen's gradual approach to raising interest rates and returning monetary policy to its precrisis norms.

(END) Dow Jones Newswires

November 02, 2017 12:27 ET (16:27 GMT)