U.S. Treasury Yields Rise As Tax Plan Passes; Dollar And Oil Struggle

U.S. Treasury yields regained some ground on Wednesday after the House of Representatives passed President Donald Trump’s $4.5 trillion tax-cut plan, although concerns over U.S. economic growth continued to weigh on the dollar and oil prices.

Stock futures in the U.S. bounced back following a mixed session on Wall Street, with Nasdaq futures up 0.6% and S&P 500 futures gaining 0.4%. Across the Atlantic, European indices saw positive movement, with EUROSTOXX 50 futures climbing 0.66%, the FTSE rising 0.7%, and DAX futures advancing by 0.84%.

In the commodities market, U.S. copper prices surged by over 4% after Trump initiated a probe into potential new tariffs on copper imports. Meanwhile, other copper markets fell following the announcement.

The Republican-led House of Representatives narrowly approved Trump’s tax-cut plan late Tuesday, sending it to the Senate where it is expected to be debated. This move spurred a rise in Treasury yields, as investors anticipate an increase in debt issuance. The 10-year U.S. Treasury yield rose by 3 basis points to 4.3289%, while the two-year yield also climbed by 3 basis points to 4.1271%.

Tony Sycamore, a market analyst at IG, noted that the tax plan’s swift progress caught the market off guard. “It moved through a little quicker than people were expecting,” Sycamore said, highlighting the surprise shift in yields.

Yields had previously dropped to their lowest in months, driven by mounting concerns over the U.S. economy. Data from Tuesday showed that U.S. consumer confidence fell at its sharpest pace in 3.5 years in February, adding to the growing anxiety about the impact of the Trump administration’s policies.

Joseph Capurso, head of international and sustainable economics at the Commonwealth Bank of Australia, expressed surprise at the weak consumer confidence data, given that its effects may not be fully felt until the impact of tariffs becomes apparent. Fed funds futures are now pricing in over 50 basis points of rate cuts by the end of the year, an increase from the previous week’s forecast of 40 basis points.

The weaker economic outlook also pressured the dollar, especially against the yen. The greenback dropped to a four-month low against the Japanese currency in the previous session but recovered slightly, trading 0.27% higher at 149.42 yen due to the rebound in Treasury yields.

In the broader currency markets, the euro weakened by 0.21% to $1.0491, staying near a one-month high. The British pound remained near a two-month peak, last trading at $1.2637. Capurso noted that the dollar’s weakening could be attributed to the soft economic data, but in the event of a severe downturn or recession, safe-haven flows could push the dollar higher again.

Concerns about a slowdown in U.S. growth also cast a shadow over oil demand. Brent crude futures rose 0.25% to $73.20 per barrel, reversing part of a 2% decline from the previous session. U.S. West Texas Intermediate (WTI) crude saw a similar 0.23% rise to $69.09 per barrel, recovering some of its 2.5% drop from Tuesday.

Gold prices remained stable, trading at $2,915.09 an ounce.

Meanwhile, Nvidia’s quarterly earnings report is highly anticipated later today, as investors seek insights into demand in the AI sector, which has driven significant investment from U.S. tech firms. Any signs of weakness in Nvidia’s report could send shockwaves through investor sentiment regarding AI stocks, according to Jacob Falkencrone, global head of investment strategy at Saxo.

In Asia, the MSCI Asia-Pacific index excluding Japan gained 1.14%, bolstered by strong performances in Chinese markets. The Hang Seng Index surged more than 3%, with the Hang Seng Tech Index jumping 4.75%. The CSI 300 blue-chip index and Shanghai Composite Index also saw gains, up 0.6% and 0.74%, respectively.

Chinese stocks have experienced a significant rally in recent weeks, fueled by breakthroughs in AI technology, particularly by DeepSeek. However, the rally was briefly interrupted by news of potential tightening of semiconductor curbs on China by the Trump administration and a memorandum directing the Committee on Foreign Investment in the U.S. to restrict Chinese investments in strategic sectors.

Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho, warned against underestimating the impact of U.S. tariffs. “It is recklessly complacent to brush off all tariff threats from the U.S. as a bluff,” Varathan stated, emphasizing the significant industrial impact the U.S. intends to inflict.