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2017.10.2015:20:00UTC+00Treasuries Move Notably Lower On Step Toward Tax Reform

Treasuries showed a notable move to the downside during trading on Friday as Republicans took a key step toward passing tax reform.

Bond prices came under pressure in early trading and remained firmly negative throughout the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, advanced by 6 basis points to 2.381 percent.

The ten-year yield more than offset the modest drop seen in the previous session, reaching its highest closing level in well over three months.

The weakness among treasuries came in reaction to news that Senate Republicans approved a budget resolution that will serve as the legislative vehicle for their tax reform plan.

The non-binding budget resolution unlocks the reconciliation process, allowing Republicans to pass their tax reform plan with a simple 51-vote majority in the Senate.

The Senate voted 51 to 47 in favor of the measure, with the vote largely coming down along party lines. Senator Rand Paul, R-Ken., was the only Republican to vote against the resolution.

"This now allows for the passage of large scale Tax Cuts (and Reform), which will be the biggest in the history of our country!" President Donald Trump said in a post on Twitter.

The GOP's tax reform plan includes a reduction in the corporate tax rate to 20 percent from 35 percent as well as a consolidation in personal income tax brackets to three from seven.

In U.S. economic news, the National Association of Realtors released a report showing an unexpected rebound in existing home sales in the month of September.

NAR said existing home sales climbed by 0.7 percent to an annual rate of 5.39 million in September from a rate of 5.35 million in August. Economists had expected existing home sales to see further downside and drop to a rate of 5.30 million.

Traders may have been reluctant to make more significant moves ahead of a speech by Federal Reserve Janet Yellen later this evening.

Economic data may attract attention next week, with traders likely to keep an eye on reports on durable goods orders, new home sales, and pending home sales.

Bond trading could also be impacted by reaction to the results of the Treasury Department's auctions of two-year, five-year, and seven-year notes.

The Treasury said it plans to sell $26 billion worth of two-year notes next Tuesday, $34 billion worth of five-year notes next Wednesday and $28 billion worth of seven-year notes next Thursday.

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