Don't Miss a Fact,
Sign Up for FINfacts!

FINfacts is a weekly newsletter highlighting recent financings and economic insights.

Subscribe Here

Tax Bill, Data, Relative Value to the Bund Combine to Push 10 year to 2.50%

After trading in a relatively tight range for many weeks, the 10 year T jumped 14 bps in 2 days as the tax bill passed the House, Senate, the House (again) and is now ready for signature (note that the bill most likely will be signed after New Year’s). The rise actually started with an allocation announcement by Germany regarding their bond issuance. Germany is the Euro zone’s benchmark bond issuer and they announced that they will borrow more in 2018, specifically by issuing more than expected long bonds (30 years in particular). This supply news caused a selloff in 10 and 30 year bonds in Europe, driving yields up internationally and domestically. With stronger than expected existing home sales in the United States combined with the final tax bill passage convinced investors that growth and deficits are on the horizon. The combination of expected events (tax bill) and unexpected (Euro announcement) proved to be volatile. All of this is exacerbated by end of year illiquidity as many institutions have filled their allocations and are winding down 2017. The movement spiked the 10 year yield past key technical levels including the October top of 2.46%, the next test is the March top of 2.62% (before the legislative dysfunction that slowed down policy movement). The next test for Washington is avoiding a government shutdown on Friday. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

On December 18th, David Pascale was interviewed by Howard Kline, Esq. of CRE Radio to discuss the most recent December Fed meeting and rate hike. Click here to listen to the podcast.