Bonds: Investors focus on US tax cut plan announcement

These were the movements in some of the most widley-followed 10-year sovereign bond yields:

US: 2-30% (-3bp)
UK: 1.08% (-1bp)
Germany: 0.35% (-3bp)
France: 0.89% (-1bp)
Spain: 1.70% (+2bp)
Italy: 2.31% (+4bp)
Portugal: 3.52% (-5bp)
Greece: 6.41% (-3bp)
Japan: 0.02% (-1bp)

Selling pressure on longer-dated government bonds abated on Wednesday in a light day for economic data and amid talk that Monday's sharp rally was more the result of short-covering than of investors coming back to the market.

Filling the void, investors were focused on the White House's release of its tax cut proposals.

The Trump Administration's top economic adviser presented plans to lower the top rate of personal income tax and to slash the rate of corporate taxation from 35.0% to 15.0%.

However, the proposal was exceedingly light when it came to where the funding for such measures would come from, raising the possibility that it might not be 'budget neutral', meaning that any reductions would have to expire in a decade's time.

Linked to the above, the White House also scrapped plans for a so-called Border Adjustment Tax - which might be in breach of WTO rules - opting instead for a so-called territorial tax system which is more benign for US corporates.

Regarding the tax cut plans' neutrality, or not, US Treasury Secretary Steve Mnuchin said: "The goal is to make it permanent but there are a lot of levers there. If we have them for 10 years that is better than nothing."

Worth noting, Mnuchin's words were met with quick opposition from the Republican chair if the House Ways and Means subcommitee on tax policy, who said on CNBC he did want to see "temporary" measures.

The question of the rate at which overseas earnings would be taxed for those companies wishing to repatriate funds from abroad - which is expected to be one of the main sources of funding for the tax cut plans - was also left unanswered.

Acting as a backdrop, investors were waiting on policy decisions the next from the Bank of Japan and European Central Bank.