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(CEP News) - U.S. Treasury futures are mixed on Monday morning, with short-dated debt rallying on hopes of a potential $775-billion stimulus package and the long end is selling off as market participants worry about the cost.
According to the Wall Street Journal over the weekend, U.S. President-elect Barack Obama is putting together a $300 billion tax cut plan for both consumers and firms in an effort to attract Republican support for a proposed economic stimulus package and to stimulate job creation. The cuts could reach as much as $775 billion in tax cuts over two years and do not include spending plans. Thirty-year futures contracts are subsequently down 18.5 ticks to 134-28.5, while 10-year futures are down 6.5 ticks to 124-03. Thirty-year futures are currently uptrending after dropping to session lows of 134-05 at 8 a.m. EST. Ten-year futures are similarly uptrending from session lows of 123-20, also reached at 8 a.m. At the belly of the curve, five-year futures are up 3.75 ticks to 118-08.75, while two-year futures are up 1.75 ticks to 108-26.5. They reached session lows of 118-01 and 108-24 respectively at 8 a.m. RBC Capital Markets fixed income strategist T.J. Marta confirmed in an earlier research note that today's market action is due to the reports concerning Obama's proposed stimulus package. "At some point, this trend will give way as the market appreciates the strength of the deflation under way, the inability of the fiscal stimulus to fix the worst cause of the recession (deleveraging), and the [willfulness] of [Federal Reserve Chairman Ben] Bernanke to cap yields in order to keep the cost of borrowing manageable," he wrote. In the meantime, March Eurodollar contracts are up 1.5 ticks to 98.745. Currently Overnight Index Swaps are pricing in a 36% chance of a 25bp cut at the Federal Open Market Committee's next meeting on Jan. 28. Note that the Fed funds target is now between 0 and 0.25%, making a cut impossible. All data taken at 8:29 a.m. EST. By Ryan Szporer,
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, with contributions from Erik Kevin Franco,
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