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US Dollar and Treasuries Wait for Tax Reform Announcement

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US dollar

After falling for two consecutive trading days, the US dollar started to recover and traded stable in the early hours on April 26. Improved global market sentiment has weighed on the US dollar this week.

Macron’s lead in the first round of France’s presidential election decreased geopolitical uncertainties and increased the risk appetite in the market. His lead also decreased the demand for safe-haven assets like the US dollar. The US Dollar Index fell to the lowest levels since November 9, 2016, but started to regain strength amid expectations of progress in corporate tax reforms by President Trump. Corporate income tax is expected to be cut from 35% to 15%. At 5:10 AM EST on April 26, the US Dollar Index was trading at 98.88—a gain of ~0.16%.

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US Treasury yields

After starting the week on a stronger note by rising on Monday, the US Treasury yield continued to strengthen and rose on April 25. The increased risk appetite in the market amid improved global sentiment took investments out of safe-haven assets like bonds. Yields move in the opposite direction compared to bond prices. Wall Street’s stronger first quarter earnings results also took strength out of safe-haven assets.

Treasury yields are mixed in the early hours. The market is looking forward to the announcement regarding tax reforms from Trump’s Administration today.

At 5:20 AM EST on April 26:

  • The ten-year Treasury yield was trading at 2.323—a fall of ~0.24%.
  • The 30-year Treasury yield was trading at 2.978—a fall of ~0.05%.
  • The five-year Treasury yield was trading at 1.851—a gain of ~0.08%.
  • The two-year Treasury yield was trading at 1.286—a fall of ~0.03%.

The iShares 20+ Year Treasury Bond ETF (TLT) fell 1.2%, while the ProShares UltraPro Short 20+ Year Treasury ETF (TTT) and the ProShares UltraShort 20+ Year Treasury ETF (TBT) rose 3.9% and 2.3%, respectively, on April 25.

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