### POV, All about taxes today -- and.......>

US TSYS: ### POV, All about taxes today -- and that could really upset today's

strong bear steepening in Tsys. Day after tax reform made it through the Senate

Committee, the short end remains sensitive to tax legislation. Wells Fargo

strategists Mike Schumacher, Boris Rjavinski and Zachary Griffiths estimate "

3mo Tbill and 2yr Treasury note yields could rise about 15bps if tax reform akin

to the House and Senate bills is enacted." Meanwhile, 5Y ylds could see 10bp of

upside, and 10s-30s 4-7bps they estimated. Is today's bear steepening the market

pricing in a low probability of enactment? Perhaps, but given the flattening in

curves to 10+ year lows, some consolidation seems prudent here. If tax

legislation stalls, Schumacher, Rjavinski and Griffiths see short end yields

falling appr 10bp as curves continue to steepen. Taking a longer term view in

light of Fed policy and willingness to normalize rates (likely hiking at Dec 13

FOMC with an eye toward 3-4 more hikes in 2018), passage of tax legislation

could upset plans for further rate hikes as Tsys curves resume flattening. If

recent pace of flattening resumes, 2y yld would invert vs. 10y yld sometime in

January, making it highly unlikely for the Fed to continue hiking.