The tax policy changes were announced by the GOP today and on the surface, some of the changes look and make sense. However, the main criticism is that corporate benefits dwarf individual changes. There is also an unexpected hit to mortgage deductions. The other big news was that the Former CEO of the Carlyle Group Jerome Powell was nominated as the next Fed Chair.

The big question will be though can the GOP get the Tax Bill through Congress? The Democrats have come out swinging and accused the Trump administration of lining the pockets of his billionaire buddies. There are inequities in the taxation of offshore profits. U.S. companies that have profits offshore will be taxed at 10% and foreign companies that operate in the U.S. will face a tax of 20% for payments they make overseas.

The impact on the day was for equity to initially fall but then it recovered to mark yet another new high. The big mover was the Vix which is now about 8.85. There is certainly no fear and volatility remains very low.

Bonds staged a small rally of sorts. The yield curve flattened between 2-10 years. U.S. worker productivity rose 3% annualised in the third quarter. This is the fastest pace for some 3-years. First-time filings on jobless benefit fell to the lowest in 44-1/2 years. The BOE raised rates and the initial response in the U.S. was to follow suit however this quickly led to buying of treasuries.


Equities: the S&P 500 rose 0.021%, the Dow gained 0.35%. The Stoxx 600 fell 0.7% and rose 1.8% for the month while the Ibex gained 0.7%.

Currencies: The euro rose 0.3 %. The pound fell 1%.

Bonds: the 2-year was steady to close at 1.61% while the U.S. 10-year closed 2.349 % in about 3bp. The 30-year closed at 2.827 % in about 3 bp on the day. The European 10-year benchmark closes were, gilts closed at 1.256%, bunds at 0.35% and OAT’s 0.594 %.

The US bond curve closes were as follows 2/10 at 73.5 bp, 2/30 at 121.4 bp and 10/30 at 47.7bp.

Commodities: Gold fell 0.05% and WTI rose 0.4% while Copper fell 0.6%. China’s biggest coal mining province Shanxi has been told to restrict industrial activity beginning Saturday to curb smog.

Aussie Market Today.

The trend is your friend as they say and there is no reason for bonds to sell off just for the moment. I expect bonds to continue with the positive tone. Equities look set for another positive day although any rally will be somewhat muted.

In addition, credit for the moment appears well bid and demand continues.