(Adds market activity, details on Biden tax proposal, analyst
comment)
By Ross Kerber
April 22 (Reuters) - U.S. Treasury yields fell back on
Thursday on news that President Joe Biden will propose a tax
hike for high earners, after climbing in morning trading.
The benchmark 10-year yield was down less than 1
basis point for the session, at 1.5556%, after having risen
above 1.587% just after noon.
Biden will propose raising the marginal income tax rate to
39.6% from 37% and nearly doubling taxes on capital gains to
39.6% for people earning more than $1 million, sources familiar
with the matter told Reuters. The money would fund
major investments in child care and paid leave for workers.
Wall Street's main indexes hit session lows as the tax news
hit. Guy LeBas, chief fixed income strategist for
Janney Capital Management, said Treasuries seemed to move in
step with stocks as investors bailed out of equities that would
lose some of their tax advantages for people in the top income
brackets.
LeBas cautioned, however, that the proposal faces many
hurdles and potential compromises, one reason the benchmark
yield remained well within the range between 1.528% and 1.633%
it has held since last week.
"There's a lot of road between here and law," he said.
Investors are looking ahead to guidance from the Federal
Reserve's meeting next week, on Tuesday and Wednesday, although
the U.S. central bank's Federal Open Market Committee is not
expected to make meaningful adjustments to policy.
Fewer Americans filed new claims for unemployment benefits
last week, U.S. Labor Department data showed on Thursday,
suggesting that layoffs were subsiding and strengthening
expectations for another month of blockbuster job growth in
April as a re-opening economy unleashes pent-up demand.
Jim Vogel, FHN Financial interest rate strategist, said this
week's relatively small movement in yields reflected investors'
focus on trading specific maturities rather than making bets
about trends across the whole yield curve while awaiting
guidance from the Fed.
"It's more dangerous to express macro views across the bond
market, when each spot trades in its own place. It's not a
unified market," Vogel said.
The Biden administration on Thursday pledged to slash U.S.
greenhouse gas emissions by 50%-52% from 2005 levels by 2030, a
target it hopes will spur other big emitter countries to raise
their ambitions to combat climate change.
A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, seen as an indicator of economic
expectations, was at 140 basis points, about a basis point lower
than its close on Wednesday.
The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was up less than
a basis point at 0.1513%.
April 22 Thursday 2:22PM New York / 1822 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 0.0225 0.0228 0.000
Six-month bills 0.035 0.0355 -0.002
Two-year note 99-243/256 0.1513 0.002
Three-year note 100-42/256 0.3196 0.000
Five-year note 99-190/256 0.8033 0.003
Seven-year note 100-24/256 1.2358 -0.002
10-year note 96-24/256 1.5556 -0.008
20-year bond 95-228/256 2.1302 -0.019
30-year bond 92-12/256 2.2422 -0.021
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 12.00 0.25
spread
U.S. 3-year dollar swap 13.50 0.25
spread
U.S. 5-year dollar swap 9.25 0.50
spread
U.S. 10-year dollar swap -0.75 0.25
spread
U.S. 30-year dollar swap -27.00 0.00
spread (Reporting by Ross Kerber in Boston; editing by Barbara Lewis
and Leslie Adler)
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