HALISTER1: U.S. Tax Holiday Could Attract $1.2t in Overseas Flows: Citi

U.S. Tax Holiday Could Attract $1.2t in Overseas Flows: Citi

(Bloomberg) -- If President-elect Trump introduces a second Homeland Investment Act, U.S. companies could repatriate much as $1.2t, or four times the amount they sent home during the last tax holiday on overseas earnings, says Citigroup.
  • The Act in 2005 led to dollar appreciation of around 15% as $300b flowed into U.S., Citi says
  • Any inflows would be supportive for equities, as money would likely to be used for dividends and M&A, which could further boost dollar, writes strategist Citi’s Steven Englander
    • An equity rally would likely pull long interest rates higher
  • State Street says the potential for new Act may spur a significant dollar rally; see story here
  • NOTE: Almost $3t in earnings from U.S. multinationals went untaxed in 1H16; Trump’s proposal in late October was for a 10% tax on past foreign earnings, down from the 35% that global conglomerates now face
  • 10-year Treasury yield is down 5bps today to 2.01% after surging 20bps overnight
  • BBDXY up 0.1% to 1,216.49 following a 1.4% gain Wednesday
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Steven Englander (Citigroup Inc)

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