BOND REPORT: Treasury Yields Continue Rise As Trump Tax Cut Returns To Agenda
U.S. Treasury prices fell, lifting yields Tuesday after investors turned their attention again back to a Republican tax-cut effort, which could add pressure for the Federal Reserve to raise rates (http://www.marketwatch.com/story/republican-tax-cut-plan-would-add-pressure-on-fed-to-hike-interest-rates-analysts-2017-10-02).
What did yields do?
The benchmark 10-year Treasury note yield rose a basis point to 2.350%, while the 30-year bond yield rose to 2.891% from 2.866% on late Monday. Bond prices move inversely to yields.
The 2-year note yield slipped 2 basis points to 1.467%, easing it off a 10-year high. Yields for shorter maturities have risen in the past few weeks after the Fed signaled its desire for higher rates despite several months of tepid inflation readings (http://www.marketwatch.com/story/fewer-auto-sales-dent-consumer-spending-in-august-inflation-still-weak-pce-shows-2017-09-29).
What did market participants say?
"The horse-trading of legislating has the market more focused on the losers and winners of tax reform. While we're skeptical that anything large can get past the gauntlet of opposing views and pet tax breaks across the political spectrum, we'd argue that the biggest overall boost for growth would come from a deficit increasing tax cut that some could find politically unpalatable," wrote Aaron Kohli, fixed-income strategist for BMO Capital Markets.
What did central bankers say?
Fed Gov Jerome Powell will give a talk on U.S. financial regulation in Washington. According to data from prediction markets, (https://www.predictit.org/Market/3306/Who-will-be-Senate-confirmed-Fed-Chair-on-February-4%2C-2018) he is one of the front-runners to take over from Fed Chairwoman Janet Yellen, once her term expires in February. Trump has interviewed Powell (http://www.marketwatch.com/story/trump-interviewed-fed-gov-powell-for-top-job-at-central-bank---wsj-2017-09-29) and former Fed Gov. Kevin Warsh (http://www.marketwatch.com/story/five-things-to-know-about-kevin-warsh-who-may-be-the-next-fed-chairman-2017-09-29) for the position.
Read:Trump says he will make decision on top Fed job in 2 to 3 weeks (http://www.marketwatch.com/story/trump-says-he-will-make-a-decision-on-top-fed-job-in-2-to-3-weeks-2017-09-29)
What data is on investors' radar?
Though investors will look forward to an empty data docket for Tuesday, analysts said traders will brace for the ADP private payrolls report on Wednesday and the Labor Department's September jobs report on Friday.
If official employment data shows the U.S. economy is adding jobs at a healthy pace, it could give the Federal Reserve the encouragement it needs to push rates higher, sapping appetite for government bonds. But many investors say a December rate increase likely, barring a significant deterioration in economic data, as the central bank has telegraphed its intent to push for tighter monetary policy at its September's meeting (http://www.marketwatch.com/story/text-of-september-fomc-statement-2017-09-20).
What did other assets do?
Yields for European government bonds rose after the producers price index rose in August by 0.3% around the eurozone. The 10-year German government debt rose 2 basis points to 0.474%, while the French 10-year government added 2.9 basis points to 0.765%.
(END) Dow Jones Newswires
October 03, 2017 09:47 ET (13:47 GMT)