BOND REPORT: Treasurys Extend Selloff After Senate Passes Tax Bill

By Sunny OhFeaturesDow Jones Newswires

Treasury prices fell, pushing up yields on Wednesday after the Senate passed a tax bill that could stoke inflation expectations and boost debt supply for next year.

What are Treasurys doing?

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The 10-year Treasury note yield was up 2.2 basis points to 2.486%. The 2-year Treasury note ticked higher 1.1 basis point to 1.854%. The 30-year Treasury bond yield climbed 3.6 basis points to 2.858%.

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, must vote again after a procedural snag. That's expected to take place later Wednesday. 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.

But before this week, bond investors has been unperturbed by the tax bill's progress. A few analysts suggested the strong bout of selling will only lead to other buyers entering the market once the bill is passed, when market jitters have subsided and prices are 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 are set to come in at 10 a.m. Eastern. Economists surveyed by MarketWatch are expecting an annual 5.59 million pace. A strong reading could highlight U.S. growth momentum and an improvement in household finances. Moreover, the positive benefits of a strong housing market could ripple out to the broader economy.

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 2.8 basis points to 0.407%.

(END) Dow Jones Newswires

December 20, 2017 09:44 ET (14:44 GMT)