By Sunny Oh
10-year Treasury yield heads back to 2.30%
Treasury yields held their ground on Wednesday as investors continued to assess progress on and prospects for tax-cut legislation working its way through Congress.
What are yields doing?
The 10-year Treasury note yield was relatively unchanged at 2.312%, up slightly from 2.309% on late Tuesday. The 2-year note yield edged higher to 1.633% from 1.629%. The 30-year bond yield was muted at 2.769%, versus 2.772%.
What's driving Treasurys?
Pushback against the tax proposal has been strong. Limitations on deductions for mortgage interest and state and local taxes are seen as among the most controversial.
Bondholders are worried tax cuts will widen the budget deficit and increase the amount of new issuance hitting the market next year, weighing on prices. Moreover, any inflationary impact could push the Federal Reserve to raise rates at a faster pace, a move that would prove bearish for U.S. government paper.
What did market participants say?
"The "Tax Cuts and Jobs Act"--TCJA--released by the leadership of the House Ways and Means Committee has been under attack, which is not surprising given that it includes numerous measures raising as well as lowering tax burdens, "wrote Jim O' Sullivan, chief U.S. economist for High Frequency Economics. "Congress will eventually pass a bill that lowers tax rates and includes at least modest fiscal stimulus in 2018. We expect some failed attempts along the way, however."
What else is on investors' radar?