BOND REPORT: 2-year Treasury Yield Rises Most In Five Weeks To Hit Fresh Decade-long High

10-year Treasury yield approaches 2.40%, a key psychological level

Treasury prices fell, pushing up yields Monday after the Senate over the weekend passed its version of tax legislation, stoking growth and inflation expectations.

What are Treasury yields doing?

The two-year note yield added 3.2 basis points to 1.810%, the largest single-day climb since Oct. 25. Yields for the short-dated maturity have collected a string of decade-long highs during its unrelenting climb.

The 10-year Treasury yield rose 1.6 basis points to 2.379%, while the 30-year bond yield ticked up 0.8 basis points to 2.771%.

Bond prices move in the opposite direction of yields.

What's driving markets?

The Senate passed its version of the tax overhaul early Saturday after Republicans rushed to make a series of 11th-hour changes to the legislation. A deficit-widening tax bill will push the Treasury Department to increase the size of its debt auctions, which could be bearish for government paper. And as a short-term boost to growth, higher inflationary expectations could lift long-dated yields, which have been stuck in a tight range between 2.60% and 2.00% this year.

A House-Senate conference committee will work to iron out differences between the legislation passed by each chamber. A final bill must then be approved by both the House and Senate for it to end up on President Donald Trump's desk.

What did market participants say?

"This is a big step forward in passing the largest overhaul of the tax system in three decades, which will give the economy a moderate lift," said Sal Guatieri, senior economist for BMO Capital Markets. "The odds of passage -- likely early next year though possibly sooner -- are now clearly better than even."

What else is on investors' radar?

Factory orders fell 0.1% in October. Economists polled by MarketWatch had forecast a 0.4% decline, from a 1.4% climb in September.

See: U.S. factory orders fall slightly in October but still look good (http://www.marketwatch.com/story/us-factory-orders-fall-slightly-in-october-but-still-look-good-2017-12-04)

With the government spending plan set to expire on Friday, Congress will need to pass a short-term spending bill by the end of the week. House Republicans are said to be suggesting a two-week "continuing resolution" to keep the federal government open until Dec. 22.

What did other assets do?

European bond yields followed Treasury yields higher. The German 10-year government bond yield rose 2.8 basis points to 0.342%. The French 10-year government bond yield added 3.7 basis points to 0.648%.

(END) Dow Jones Newswires

December 04, 2017 16:16 ET (21:16 GMT)