Treasuries Close Firmly Negative As House Approves Tax Reform Bill

(RTTNews) - Treasuries showed a significant move to the downside during trading on Tuesday, extending the decline seen in the previous session.

Bond prices moved steadily lower over the course of the session before closing firmly in negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped by 7.1 basis points to 2.463 percent.

The lower close by treasuries came after House Republicans voted to approve the first major tax reform legislation in several decades, cutting tax rates for businesses and individuals.

The House voted 227 to 203 in favor the bill known as the Tax Cuts and Jobs Act, with the vote coming down largely along party lines. Only 12 Republican congressmen voted against the bill.

The bill reduces the corporate tax rate to 21 percent from 35 percent, gives tax breaks to pass-through businesses and includes provisions intended to encourage domestic business investment.

The legislation also reduces tax rate for most individuals, although the tax cuts for individuals are set to expire.

Following the vote in the House, the Senate is expected to approve the bill later in the day by a narrow margin.

The approval of the legislation, which President Donald Trump has pledged to sign, comes even though recent polls show a majority of Americans disapprove of the bill.

Republicans claim that the bill will lead to stronger economic growth, while Democrats argue the legislation will give tax cuts to the wealthy at the expense of the middle class.

On the U.S. economic front, the Commerce Department released a report showing an unexpected increase in housing starts in the month of November.

The report said housing starts jumped 3.3 percent to an annual rate of 1.297 million in November from a revised 1.256 million in October. Economists had expected housing starts to drop by 3.7 percent.

Trading on Wednesday may be impacted by reaction to the National Association of Realtors' report on existing home sales in November.