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?
The 10-year Treasury note yield TMUBMUSD10Y, -0.14% rose 3.3 basis points to 2.497%, its highest level since March 17. It briefly pushed above 2.50%.
The 2-year Treasury note TMUBMUSD02Y, +0.45% ticked higher 0.6 basis point to 1.861%, while the 30-year Treasury bond yield TMUBMUSD30Y, +0.03% climbed 5.4 basis points to 2.876%, a six-week high.
Bond prices move in the opposite direction of yields.
What’s driving markets?
With the tax legislation, which includes a sharp reduction in corporate tax rates, 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: Historic tax overhaul heads to Trump for signature
Read: Here are the winners and losers of the final version of the Republican tax bill
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?
Some analysts questioned what impetus there would be to extend a selloff and drive yields substantially higher.
“Now that the GOP has effectively reached the finish line and 10-year yields remain [below] 2.50%, anyone attempting to spin a bearish narrative for Treasuries should be pondering what’s next,” 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. 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 TMBMKDE-10Y, +4.33% rose 2.3 basis points to 0.402%.