10-year Treasury futures stable as US removes retaliatory tax

10-year Treasury futures stable as US removes retaliatory tax

June 19, 2025 — The 10-year Treasury futures have remained stable following the removal of a retaliatory tax provision from President Donald Trump’s tax bill. This move, announced by Treasury Secretary Scott Bessent, aims to align with a global tax agreement reached with G7 countries.

The Section 899 provision, also known as the “revenge tax,” was initially included in the bill to counter several European countries and others imposing discriminatory taxes on U.S. firms. However, after reaching a deal with the Organization for Economic Co-operation and Development (OECD) and other G7 countries, Bessent requested the removal of this provision [1].

The removal of Section 899 is expected to provide greater certainty and stability for the global economy, enhancing growth and investment. An analysis by the Global Business Alliance estimates that the provision would have cost the U.S. 360,000 jobs and $55 billion annually in lost gross domestic product over 10 years [1].

The decision to remove the retaliatory tax comes as investors continue to monitor U.S. long-term bond funds, which saw significant inflows in May. According to Morningstar data, U.S. long-term bond funds attracted $7.4 billion in May, their largest monthly inflow in over two years [4]. This trend reflects investor expectations of weaker growth and a view that bonds offer better value than other riskier assets.

The stability in 10-year Treasury futures, despite the removal of the retaliatory tax, indicates that investors are confident in the U.S. economy's resilience. The Treasury yield curve has shown resilience, with yields holding steady as investors await data and Fed comments [3].

The 3-year U.S. Treasury Note futures continue to offer hedging granularity, relative-value, and cost-effective execution, facilitating seamless curve trading with other tenors [5]. This product's narrow deliverable window and precise exposure at the short end of the curve make it an attractive option for investors seeking to manage their Treasury exposure.

In conclusion, the removal of the retaliatory tax provision from President Trump’s tax bill has not significantly impacted the stability of 10-year Treasury futures. Instead, investors remain focused on the broader economic outlook and the potential for long-term bonds to serve as a hedge against equities and other risk assets.

References:
[1] https://ca.finance.yahoo.com/news/lawmakers-remove-revenge-tax-provision-213902326.html
[2] https://news.bloomberglaw.com/daily-tax-report/treasury-deal-kills-revenge-tax-that-spooked-wall-street-1
[3] https://www.cnbc.com/quotes/US2Y
[4] https://www.reuters.com/business/investors-returned-us-long-term-bond-funds-may-2025-06-25/
[5] https://www.cmegroup.com/markets/interest-rates/us-treasury/3-year-us-treasury-note.html