Treasuries Fall After Trump Says Tax Plan Coming Soon

  • 30-year yield breaches 3% before auction amid snowstorm
  • 2-, 5-year yields rebound from 2017’s lowest closing levels

Treasuries fell after President Trump said action on taxes would be forthcoming in two to three weeks, which ignited gains for the dollar and U.S. stocks. 

Yields were higher by 3-6 basis points as of 2:30 p.m. in New York, erasing Wednesday’s declines. The 30-year yield topped 3% ahead of a $15 billion 30-year auction, the final leg of the first-quarter refunding. Yields declined Wednesday, the 2-year and 5-year to their lowest closing levels this year, as hope for fiscal stimulus faded with Trump cabinet nominees facing delays obtaining Senate confirmation.

  • Trump comment on taxes boosted market-implied odds of a Fed rate increase by June, was followed by volume surge in eurodollar futures
  • A snowstorm in the U.S. Northeast, while thinning out some trading desks, prompted no change to the auction schedule, as in January 2015 when offerings were delayed or rescheduled because of weather
  • Yields were near session highs at auction bidding deadline, and edged slightly higher afterward despite better-than-average results
  • Auction was awarded at 3.005% vs WI yield of about 3.007% at bidding deadline; three of last four 30Y refundings tailed
  • 28.9% primary dealer award was higher than previous as indirect award fell, offset by higher direct award; it was below 31% avg for last four refundings, however
  • Earlier, yields rose as European political risk arising from French elections faded further; French-German 10-year yield spread retreated more, to about 67bp from four-year high near 77bp reached Feb. 6
  • 5s30s curve was steeper by about 1bp near 115bp after flattening 5.6bp over past two sessions; it peaked at 116bp after Fed’s Bullard said rate increases leave Fed in a better position to reduce the size of its balance sheet
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