BOND REPORT: Treasury Yields Erase Declines After Trump Promises Tax Cut Next Week

Fed speakers, U.S. economic data are on the docket for Friday

Treasury prices fell Friday, pushing up yields, as investor appetite for riskier assets was boosted in response to U.S. President Donald Trump's promise to unveil a tax plan next week, outweighing a flight to safety ahead of the first round of the French presidential election this weekend.

The yield for the 10-year Treasury note slipped 0.4 basis point to 2.219%, capping off a three-week decline. The yield for the 2-year note edged off 2.5 basis points to 1.164%, while the 30-year bond yield was flat at 2.893%.

Bond prices move in the opposite direction of yields; one basis point is one hundredth of a percentage point.

Treasury yields erased declines from early morning trading after Trump said he planned to release a new tax plan next week on Wednesday, in an interview with the Associated Press. The bill would include a "massive" tax cut for businesses, he said.

"It's good that [Wednesday] is a definitive day, but he might be under a lot of pressure to deliver something in his first 100 days," said Subadra Rajappa, head of U.S. rates strategy for Société Générale.

See: 'Big announcement' coming Wednesday on tax reform, president says (

The Sunday election in France is a tight four-way race, with a lack of conviction on the outcomes driving modest haven buying, analysts said. It's expected that no candidate will receive 50% of the vote this weekend, the threshold for winning the race outright.

"Essentially we've got the French elections which could really go either way this weekend, the outcome is really quite uncertain and what seems to be happening here is a flight to safe havens going into the weekend," said Tom di Galoma, managing director for Seaport Global Securities. He pointed out 30% of the electorate was still undecided and could swing the vote to force an unanticipated outcome.

See: Here's how france's hotly contested election could spark market turmoil (

Both far-left Jean-Luc Melenchon and far-right Marine Le Pen have taken a critical position on the eurozone, the former arguing the economic bloc acts as a conduit for pushing neo-liberal capitalism to its member countries and the latter promising to declare a referendum for France to renegotiate its membership of the EU. Yet even as talking heads talk up the chances of an extremist candidate winning the French presidency, polls still suggest that centrist Emmanuel Macron will be most likely to face off with one of his euroskeptic rivals in the second round.

On the data front, the Markit purchasing manufacturers index in the manufacturing and services sector slipped to 52.8 in April from 53.3 in March, any reading above 50 is a sign of growth. Existing home sales rose from 5.47 million to 5.6 million. The indicators will give a broad overview of the economy's current health.

Federal Reserve Vice Chairman Stanley Fischer said the Federal Reserve's monetary policy setting committee had yet to decide when to start unwinding its $4.5 trillion balance sheet ( He said he still expected three rate hikes this year, in an interview with CNBC.

(END) Dow Jones Newswires

April 21, 2017 17:16 ET (21:16 GMT)