Washington remained the center of attention as Republicans drew even closer to clinching victory on sweeping tax cuts. Yields continued their trek upward Wednesday after both the Senate and the House of Representatives passed one of the largest tax bills in decades.
The bill would slash tax rates for businesses while temporarily trimming the tax burden on most, but not all, individuals.
"Now that tax reform is almost signed into law, people are looking at the $1.5 trillion increase in the deficit and what that will mean for yields," explained Craig Bishop, vice president of U.S. fixed income at RBC Wealth Management. "If you do get a pickup in growth: what does that mean for the Fed? Does it have to become more aggressive down the road?"
But Bishop also stressed that recent moves in Treasury yields are likely due to activity in Germany after the country unveiled a plan to expand the amount of debt it will issue in 2018. German bund yields jumped higher after the news Tuesday, appearing to pull U.S. debt yields along for the ride.
The 10-year German bund was last trading at 0.4 percent.
"I think going into this move, I would point to the Treasurys' relationship to the bund," said Bishop. "Last summer when Draghi came out with something viewed as hawkish the bund moved upward and Treasurys moved in lockstep."