BOND REPORT: 10-year Treasury Yield Highest Since March As Congress Passes Tax Overhaul

By Sunny OhFeaturesDow Jones Newswires

Treasury prices fell, pushing up yields on Wednesday after Congress passed a sweeping tax overhaul, handing it over to President Donald Trump for his signature.

What are Treasurys doing?

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The 10-year Treasury note yield was up 1.9 basis points to 2.483%. The 2-year Treasury note ticked higher 2.2 basis points to 1.865%. The 30-year Treasury bond yield climbed 4.6 basis points to 2.868%.

Bond prices move in the opposite direction of yields.

What's driving markets?

The House passed the legislation Tuesday, while the Senate approved it early Wednesday morning. The House, however, voted again due to a procedural snag, setting the stage for Trump's signature and handing the administration its first major legislative victory.

With the legislation expected to significantly widen the budget deficit, bond investors could see yields head higher. That's because the combined impact of reduced bond purchases by the Federal Reserve and rising issuance by the Treasury Department has drawn concerns the bond market will have to absorb a supply deluge, weighing on debt prices.

See: House sends Republican tax bill to Trump (http://www.marketwatch.com/story/house-sends-republican-tax-bill-to-trump-2017-12-20)

Read: Here are the winners and losers of the final version of the Republican tax bill (http://www.marketwatch.com/story/here-are-the-winners-and-losers-of-the-final-version-of-the-republican-tax-bill-2017-12-18)

But before this week, investors were unperturbed by the tax bill's progress. A few analysts suggested the strong bout of selling would only lead to other buyers entering the market once the bill was passed, when market jitters subsided and prices became more attractive.

What did market participants say?

"Tuesday's...selloff was simply the icing on the proverbial bearish cake and in the wake of final confirmation of the tax change, we'll see if 'selling the rumor and buying the fact' was indeed the correct strategy for tax reforms," wrote Ian Lyngen and Aaron Kohli, fixed-income strategists at BMO Capital Markets.

What else is on investors' radar?

Existing home sales for November jumped 5.6% to a 5.81 million annual rate (http://www.marketwatch.com/story/existing-home-sales-roar-to-the-highest-since-2006-2017-12-20). Economists surveyed by MarketWatch are expecting an annual 5.59 million pace. Though the positive benefits of a strong housing market could ripple out to the broader economy, some economists said it was more of a reflection of lean supply.

What other assets are on the move?

European bonds continued to fall under pressure. German government bonds saw sustained selling well after Tuesday when its finance ministry announced it would increase debt issuance for next year. The 10-year German government bond yield rose 2.3 basis points to 0.402%.

(END) Dow Jones Newswires

December 20, 2017 13:38 ET (18:38 GMT)