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Treasury yields declined last week, with the week/week change led by the intermediate and long sectors of the market. The 10-year note closed at 2.056%, down about 7 basis points on the week, which left the 2-10 years spread at +23.5 basis points. The drop in the 10-year yield was entirely due to a decline in the 10-year “real” yield, as the 10-year TIP declined by about 8 basis points on the week while the 10-year break-even inflation rate (i.e., the on-the-run minus the TIPS yields) increased by about 1.5 basis points.
Treasury yields mostly rose last week, although the front end of the yield curve rallied modestly after fairly dovish testimony from Fed Chairman Powell. While the 10-year yield rose by almost 9 basis points to close the week at 2.12%, the yield on the 2-year note actually declined by 1.5 bps. This left the 2-10 year spread wide by 10 basis points week/week after moving inside +16 bps last Tuesday, before a selloff in the intermediate and long end of the curve later in the week.
Intermediate and long-maturity Treasuries continued to rally last week, leaving the yield on the 10-year right at the 2% mark. The rally mainly benefitted maturities longer than seven years, as the 2-year yield only declined by a basis point (versus 5 bps on 10s) which left the 2-10 year spread at +25 bps. The rally incorporated both a lower TIPS break-even inflation rate (with the 10-year B/E ending the week at 1.7%, about 3.5 bps lower) while the TIPS yield itself (a proxy for a “real” 10-year rate) declined by about 2 bps to 0.30%.
Bonds continued their rally last week, although the 10-year failed at an initial attempt to break through 2%, closing at 2.056%. The rally was triggered by dovish statements from the Fed’s Open Market Committee that led traders to conclude that a rate cut is almost certain at the 7/31 meeting. (The Fed Funds futures market currently projects at least two rate cuts this year.) The Treasury yield curve (2-10s) ended the week steeper by about 6 basis points, while the 2-5 spread widened by 3 bps to close at +2 bps. Overseas rates also followed Treasuries lower, with the German 10-year ending the week at -0.29%.
Treasury yields did not change much last week, despite some volatility that briefly took the 10-year yield to 2.15% before closing at 2.08%. The yield curve configuration was also little changed, with the 2-10 year spread moving out by about ½ basis point while 2-5s inverted by a basis point and the 5-30 spread widened by about 3 bps. The TIPS (inflation-protected) break-even rates, which serve as proxies for expected inflation, declined noticeably last week, with the 5-year break-even contracting by 14 basis points despite a slight uptick in the CPI.
Treasury yields continued to push lower last week, with the 10-year yield ending the week at 2.083% after renewed concerns over trade spats and a weak Employment report.
A lot has changed since our last update in...
Treasuries rallied last week as the U.S.-China relationship deteriorated amid a breakdown in trade talks. The 10-year Treasury closed just over the 2.45% level, with the rest of the curve (except the 30-year bond) moving pretty much in concert.
Treasury yields moderated a bit at the end of a...
Treasury yields moved in a narrow band last week, with intermediates maturities lagging both the short and long end of the curve. The reshuffling of the curve left the 2-5 spread inverted by less than a basis point, while the 2-10 year spread moved wider by roughly 4 basis points.