European Bonds Slide Along With Treasuries on U.S. Tax Reform

(Bloomberg) -- European government bonds dropped alongside Treasuries after the Republican tax-reform bill passed through the U.S. Senate, while traders looked past the investigation of Donald Trump’s team and their Russian contacts.

French securities led declines across Europe as the U.S. tax-reform bill made it through the Senate late Friday, helping to reverse global risk-off sentiment in the market. Investors sought the relative safety of fixed-income assets at the end of last week on news that Trump’s former security advisor Michael Flynn said the President’s team asked him to make contact with Russians.

“U.S. tax cuts fully reversed the furiously bullish bond markets dynamics on late Friday on political concerns,” Rainer Guntermann, a strategist at Commerzbank AG, wrote in a note to clients. They “will be the key driver for global risk sentiment for now and bunds look set to start the week under the spell of re-weakening U.S. Treasuries.”

French 10-year bond yields climbed four basis points to 0.65 percent as of 8:32 a.m. in London, after sliding eight basis points Friday. Those on benchmark German bunds rose four basis points to 0.34 percent, having dropped to 0.29 percent Friday, the lowest since Sept. 8. Treasury 10-year yields climbed three basis points to 2.40 percent, paring Friday’s five-basis-point decline.

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