Bonds plunge again on tax cut angst

Treasury prices plunged on Wednesday for a second straight day, pushing benchmark yields to a six-month high, after a deal to extend tax cuts fueled fears of inflation and a swelling budget deficit.

The intense sell-off raised worries over demand at a $21 billion sale of 10-year notes later this session and a $13 billion reopening of a 30-year bond issue on Thursday.

"This tax agreement is a disaster for the U.S. fiscal situation," said Howard Simons, strategist at Bianco Research in Chicago.

A proposal to extend the Bush-era tax-cuts is expected to boost U.S. economic growth by as much as 1 percentage point next year. But the long-term cost to the government from falling tax receipts has spooked bond investors and resulted in a disappointing three-year debt auction on Tuesday.

Read Full Article from Reuters

- Posted: 2010-12-08 10:23:24

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