Treasury yields at nine-month high

US Treasury yields rose to nine-month highs on Wednesday on optimism a US tax overhaul will help boost growth and as economic data improves. The Republican-controlled US House of Representatives gave final approval to the biggest overhaul of the US tax code in 30 years, sending a sweeping $1.5 trillion bill to President Donald Trump for his signature.
Many investors expect that tax cuts will help spur investment and spending that will in turn boost the economy and increase stubbornly low inflation. "The tax reform is really what's been driving yields as well as risky assets over the last few trading sessions," said Subadra Rajappa, head of US rates strategy at Societe Generale in New York. Also, "we've seen strong data, so that typically tends to cause a selloff."
In economic news, US existing home sales increased more than expected in November, hitting their highest level in nearly 11 years, the latest indication that housing was regaining momentum after almost stalling this year. Yields on the US government benchmark bond remained lofty, though off earlier highs following the announcement.
Looking ahead, the market will be paying attention to the core Personal Consumption Expenditures index reported on Friday, which measures price changes in consumer goods and services. The Federal Reserve's favored gauge of inflation will come as levels have moderated for much for this year. Continued weakness could complicate the central bank's deliberations about raising rates in 2018.
The US core Consumer Price Index (CPI) slowed in November to an annual increase of 1.7 percent from 1.8 percent the previous month. Benchmark 10-year notes were down 8/32 in price to yield 2.480 percent, up from 2.463 percent on Monday. The yields earlier rose to 2.497 percent, the highest since March 21.
The yield curve between two-year and 10-year notes also steepened as high as 63 basis points, a record since November 30 as longer-dated notes underperformed on growth optimism and as some traders unwound positions that had been betting on further flattening.