2017.05.2323:26:00UTC+00Treasury Yields Surge as Trump’s New Budget Bolsters Growth Prospects

U.S. government bond prices retreated as yields rallied after the Trump administration's new budget increased prospects of stronger growth and higher inflationary pressure, countering a slight flight to safety prompted by a bombing incident in the U.K.

Yield on the ten-year Treasury note advanced 3.1 bps to 2.285 percent, after falling as low as 2.225 percent in early trading. Meanwhile the yield on the two-year note edged up 2.9 bps to 1.275 percent. The 30-year bond yield surged 3 bps to 2.946 percent. Both the short-end and long-end U.S. government debt posted their biggest one-day yield increase in over two weeks.

Treasury yields posted strong gains after the White House issued its budget proposal for the fiscal year 2018. If the request gets a green light from the Congress, it is seen to jumpstart the reflation trade once more as investors lift bets of his pro-growth agendas which includes tax reforms and an infrastructure bill.

However, there are doubts that the proposed budget will secure the Senate's rubber stamp.

A wave of new supply of Treasuries and corporate bonds also hit the Treasury market. Traders said the new debt actions from both the Department of Treasury and the private sector undermined the haven flows in the market.

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