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Business Title: TREASURIES-Sell Off In Europe On Tax Cut Worries LONDON/TOKYO, Dec 8 (Reuters) - U.S. Treasury prices fell sharply on Wednesday, pushing yields higher, as a proposed extension of tax cuts stoked fears over the U.S. government's control of the budget deficit. A poorly received sale of German Bunds added to the exodus from government securities. "The market is suffering still in the aftermath of the compromise on the tax agreement between Obama and the Republicans," said Nick Stamenkovic, bond strategist at RIA Capital Markets Edinburgh. U.S. President Barack Obama reached a deal with Republican members of Congress to extend for a further two years a series of tax cuts first introduced by President George W. Bush. Economists have estimated that extending the tax cuts could boost U.S. GDP next year by between half and one full percentage point. However, some analysts say that as the cuts would be paid for by further borrowing they raise concerns over fiscal sustainability. The 10-year U.S. Treasury yield rose to 3.20 percent during European trading hours. During trading in Asia, it reached 3.25 percent US10YT=RR, a level not seen since late June and beyond Tuesday's high of 3.18 percent. The yield has risen more than 40 basis points so far this month. The 200-day moving average on the 10-year yield was at a key resistance point -- 3.10 percent. It was the first meaningful break of the 200-day moving average since November 2009, according to CRT Capital Group in Stanford, Connecticut. A 4 billion euro sale of two-year German Bunds became the third German debt auction in a row to attract weak demand as investors favoured riskier assets. Investors were beginning to set up for a $21 billion sale of 10-year notes, set for 1800 GMT. RIA's Stamenkovic said the 3.25 percent 10-year level was still significant, though it was possible that 10-years would not reach that yield before the auction. He added that selling appeared to be coming from asset managers and short-term momentum players. "We've come of the (price) lows but there are a lot of nerves about the 10-year auction today," he said. The market is at a critical juncture, as a 10-year yield of 3.17 percent represents a 50 percent retracement of the April-October fall to 2.33 percent from 4.01 percent. If the 50 percent retracement is clearly broken, some market players may look to 3.37 percent, a 61.8 percent retracement, as the next target. A rise to that level would hardly be out of sync with the economic outlook, given that many economists expect the U.S. economy to grow more than 3.0 percent next year, traders said. The tax cut extension prompted investors to move from bonds into stocks, commodities and other risky assets on the view that the tax deal would stimulate the economy. The deal, which also calls for a 2 percent employee payroll tax cut and a 13-month extension of unemployment benefits, was larger than many market players had expected. But the tax move is expected to have a hefty price tag. The non-partisan Congressional Budget Office estimated the plan would cost the government about $500 billion in lost tax receipts at a time when Obama is under pressure to cut the $1.3 trillion budget deficit.
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#1. To: Brian S (#0)
I want to thank Obama and the Republicans for keeping my taxes low. It's heartwarming to see how willing both parties are to keep driving up the national debt, saddling your children and grandchildren with the consequences. If you really want to make me happy, how about cutting the capital gains tax to zero? Again, I thank you, but you could do more.
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