19.12.201720:40:00UTC+00Treasury Prices Under Pressure as Tax Package in Focus

U.S. government bond prices declined, driving up yields as the House, in line with expectations, passed the corporate tax-cut legislation, stoking growth and inflation expectations.

A procedural roadblock, however, surfaced after the closing of the U.S. markets, requiring the House to cast its vote again on the bill on Wednesday before sending it to the Senate.

The benchmark 10-year Treasury note rose 7.2 basis points to 2.464 percent, marking its highest level since March 20 and its biggest single-day increase since September 27.

The two-year note yield advanced 2.3 basis points to 1.854 percent. Meanwhile, the 30-year bond yield jumped 7.8 basis points to 2.822 percent, the biggest single-day advance since September 27.

The biggest driver in the bond market is the tax code overhaul proposal by the Republican Party. After examining some of the details, some analysts said that the final tax bill version has allocated a lot of the changes towards tax benefits and could bolster near-term growth more than initially estimated. This prompted economists at BMO Capital Markets to lift their 2018 GDP forecast to 2.6 percent from 2.4 percent for a successful tax revamp.