Treasuries Advance After GOP Cancels Vote on Health-Care Bill

  • Bonds fall from highs on brief stocks gain after bill pulled
  • Five-year sector outperforms, aided by futures block trade

Treasuries advanced as Republicans scrapped a vote on legislation to repeal and replace Obamacare, casting doubt on the prospects for the administration’s fiscal agenda, including tax cuts.

The 10-year yield was lower by 1.1 basis points at 2.41 percent at 4:15 p.m. in New York after falling as much as 2.9 basis points. The fate of health-care reform has been a primary driver of Treasuries over the past three days, with yields rising and falling with the perceived odds it will pass. Friday’s highs were reached after reports that Republican leaders had determined the vote, postponed to Friday from Thursday, still didn’t have enough support.

  • Late volatility in stocks heading into the close saw Treasuries off session highs; USD/JPY rallied aggressively from near session lows as news filtered through that Republicans had scrapped the health-care vote
  • 5Y sector led USTs higher, aided by block trade in 5Y futures; 2s5s10s butterfly fell to session lows under 20bp
  • 10Y yield remained pinned between its 50-DMA (2.454%) and 100-DMA (2.381%) for third straight day, though 30Y yield breached its 100-DMA, closing below it for first time since October
  • USTs also were buoyed by gains for most European bond markets led by Spain despite stronger-than-expected March PMIs for Germany and France
  • Preliminary futures open interest data for Thursday suggested that large volumes in 5Y and 10Y put options represented new bets on higher yields by expiration at 3pm ET Friday
  • Yields are lower on week by seven to 11 basis points; most of the drop occurred Monday and Tuesday as U.S. stocks fell and USD/JPY broke to YTD lows

— With assistance by Edward Bolingbroke

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