US Treasury yields rose on Thursday as optimism wrapped markets following comments from President Donald Trump that he would reveal plans for US tax reform in the coming weeks. Yields jumped from multi-week lows touched Wednesday after Trump said during a meeting with airline executives that a major tax announcement would be forthcoming in a matter of weeks.
"We''re going to be announcing something I would say over the next two or three weeks that will be phenomenal in terms of tax and developing our aviation infrastructure," Trump said on Thursday.
Sentiment among traders that the US government bond market may have rallied too much in recent days prompted further selling on Thursday. Yields had fallen Wednesday as buyers bought Treasuries partly on pessimism that Trump''s fiscal spending and tax reform plans might not pan out anytime soon.
"The thrust that we''ve seen today is largely on the back of the commentary regarding the timing of potential for tax reform, which candidly caught the market a little bit by surprise," said Bill Northey, chief investment officer at the Private Client Group at US Bank in Helena, Montana.
"It has been one of the elements that has led to the animal spirits being rekindled in the post-election period of time, but seemed to be illusive on details."
The market had largely come to expect that tax proposals from the Trump administration would not come until later in the year, leading to the selloff in riskier assets like US equities and buying of low-risk assets like Treasuries, Northey added.
US 30-year yields fell to a three-week low of 2.945 percent Wednesday, while five-year yields
touched a two-month low of 1.794 percent Wednesday.
Longer-dated yields, which are more sensitive to inflation expectations, led the selloff on Thursday as investors expect fiscal stimulus measures like tax cuts to drive inflation higher.
Benchmark 10-year notes fell 16/32 in price to yield 2.393 percent, more than 5 basis points higher than their late Wednesday levels.
The 30-year bonds dropped 1-2/32 in price to yield 3.017 percent, also up more than 5 basis points from their levels on Wednesday.
Yields took little impact from the US Treasury''s auction of $15 billion of 30-year bonds, which analysts said produced generally solid but unremarkable demand, earlier in the day.
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