Treasury yields showed little change as investors look ahead to President Donald Trump’s plans for a corporate tax cut which could give a further boost to stocks and other assets perceived as risky and, in turn, curtailing appetite for havens like government bonds.
The yield on the 10-year Treasury note
edged off 0.5 basis point to 2.328%, after earlier pushing above important chart resistance at 2.32%. Bond prices move in the opposite direction of yields.
Bond prices move in the opposite direction as yields; one basis point is one hundredth of a percentage point.
Investors are waiting for Trump to roll out his tax package on Wednesday. Sources within the new administration have suggested he will lower the corporate tax rate from 35% for the top payer to 15%. Though corporations blame the onerous tax regime for crimping growth and discouraging the repatriation of profits, many do not pay the full headline tax rate through deductions and credits.
Stocks and assets perceived as risky have been on a strong streak after Trump said he planned to present a tax reform bill. Investors hope a jump in corporate earnings will justify or translate into higher stock prices after his election. The Nasdaq Composite Index
broke through 6,000 to reach a record high on Tuesday.
“The “tax code rally” doesn’t have the same ring to it, however, an aggressive cut to the tax rate could be a key driver for stocks going forward, as long as the plan is not watered down by Congress in the legislative phase,” said Kathleen Brooks, research director at City Index, in a note.
But bond markets have displayed a distrust of Trump’s ability to reach across the aisle and carry out major fiscal reforms. Though Treasury yields have risen over the last few days, they are still a far cry away from 2.60%, their highest levels during the early days of Trump’s presidency.
The Treasury Department will hold a $34 billion auction of 5-year notes. Auctions of U.S. government paper can impact yields and prices of Treasurys for the outstanding market.
The Commerce Department will announce revisions to retail sales for March. Recently, falling consumer spending at shops has added fuel to the concern that the economy will fail to grow at a sufficient pace to push up inflation and ensure the Federal Reserve will keep to its schedule of two more rate hikes this year.