Treasury prices under pressure as investors snap up stocks, other risky assets
Treasury prices retreated Tuesday, continuing to sending yields higher, as investors continued to pile back into stocks and other assets perceived as risky at the expense of traditional havens like government bonds.
The yield on the 10-year note climbed 3 basis points to 2.305%, briefly approaching the two-week high of 2.315% before heading lower. The yield on the 2-year note rose 2 basis points to 1.254%, while the yield on the 30-year Treasury bond , also known as the long bond, rose 2 basis points to 2.957%.
Bond prices move in the opposite direction of yields; one basis point is one hundredth of a percentage point.
After Sunday's first round vote in France's presidential election set up a May 7 runoff between far-right, anti-euro candidate Marine Le Pen and centrist Emmanuel Macron, assets perceived as risky, including equities, popped higher. Investors switched from bonds back into equities, pushing yields higher across the board in U.S. and Europe.
Stocks continued their run Tuesday, with U.S. equities getting a boost from upbeat earnings. The Nasdaq Composite topped 6,000 for the first time ever, while Dow industrials advanced more than 200 points in early action and the S&P 500 rose 0.5%.
Gold, a haven asset, fell 0.6% to $1270.2 per ounce. Yields for the 10-year German benchmark bond rose 4.1 basis points to 0.374%, while yields for the 10-year French bond , or OATS, gained 5.1 basis points to 0.883%.
But market strategists warn even with Macron's victory at the ballot box, he has further problems to contend with, namely, the task of earning the support of the establishment parties during his tenure as head of state. Both the Republican party and the Socialist Party have always had a candidate at the runoff, yet both were out after the first round.
"Our "sigh of relief" rally is real but other sighs may be forthcoming as Mr. Macron contends with the French establishment, in a few months' time," said Mark Grant, chief strategist for Hilltop Securities, in a note to clients.
Sources within the new administration said President Donald Trump plans to cut the corporate tax rate to 15% from 35% to stimulate economic growth, even at the cost of a sharp fall in tax revenues. America had the third highest top corporate tax rate in the world in 2014. Though stocks edged up in response to his announcement, Treasury yields showed little change.
See: Trump seeks corporate tax rate of 15% in plan (http://www.marketwatch.com/story/trump-seeks-corporate-tax-rate-of-15-in-plan-2017-04-24)
Traders are looking ahead to an auction of $26 billion worth of 2-year notes at 1 p.m. Auctions of Treasurys can influence prices and yields for the overall market.
On the data front, The Conference Board's consumer confidence index for April, the new home sales for March and manufacturing data from the Richmond Fed will all be released at 10 a.m. Eastern. The Case-Shiller Index, a measure of growth in home prices across 20 major U.S. cities, rose 5.9% year-over-year in February, budging up from 5.7% in February.
(END) Dow Jones Newswires
April 25, 2017 09:58 ET (13:58 GMT)