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Cap-Gains Tax Proposal Saps Stock Gains

US TSYS SUMMARY
Rates higher after the closing bell -- a choppy session on an inside range day.
Salient factors:
  • Data finally returned but markets appeared indifferent to lower than expected weekly claims (547k vs. 610k est; prior revisions 586K; continuing claims -0.034M to 3.674M).
  • First half attention more on ECB policy annc: unchanged (as expected), the most market-moving comment was Lagarde saying negative interest rates were an effective tool for providing accommodation - not a big surprise, but triggered a reversal higher in Bunds and Euribor.
  • Rates traded lower as quietly equities gained through midday, S&Ps did not quiet make it to Apr 16 all-time highs of 4179.75.
  • Torpor broken around 1300ET over headlines Pres Biden PROPOSAL over capital gains tax increase to 39.6% to as high as 43.4% for wealthy. Risk-on reversed: equities sold off sharply/Bonds lead rebound while VIX neared 20.0.
  • Late chop ensued as markets digested the headlines, estimating success of proposal to nearly double current cap gains tax as unlikely.
  • The 2-Yr yield is up 0.2bps at 0.1492%, 5-Yr is up 0.3bps at 0.8001%, 10-Yr is down 0.3bps at 1.5521%, and 30-Yr is down 1.6bps at 2.2346%.
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