A top Goldman Sachs strategist said on Tuesday that US Treasuries are the least pricy compared with their major counterparts, whose yields have been held down by bond purchases from their respective central banks. "Since last November, US bonds have been leading the rise in global rates almost single-handed - with their counterparts in Japan and Europe remaining firmly anchored by QE programs," the US investment bank's co-head of global macro and markets research, Francesco Garzarelli, wrote in a research note.
US yields, which have fallen following the Federal Reserve's signal last week that it will remain on a gradual pace to raise interest rates, are still well above those on German Bunds, British Gilts and Japanese government bonds. "They remain the least-expensive bond market among the majors," said Garzarelli, based on the firm's analysis.
The benchmark 10-year Treasury yield fell to 2.45 percent on Tuesday, the lowest in nearly three weeks, prompted in part by the lack of progress on fiscal changes pledged by US President Donald Trump and leading Republican lawmakers.
Trump met with Republicans in Congress to seek support for a proposal to overhaul the Affordable Care Act, also known as Obamacare. House leadership has sought a vote on the plan on Thursday despite opposition within the GOP and from Democrats. Passage of the healthcare overhaul in the House would raise expectations that Trump and Republican leaders would tackle tax cuts and infrastructure spending in May, Garzarelli said.
But if a House vote were to fail on Thursday, stock markets might wobble on worries about a delay on fiscal stimulus, which has been the driving factor behind Wall Street's recent climb to record peaks, he said. "And, correspondingly, yields may find it harder to re-test recent highs."
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