The targeted killing of a key Iranian general put a stop to the bearish steepening that prevailed through much of December. Friday’s rally pushed the yield on the 10-year note to its lowest level in a month, closing at 1.78% after printing as high as 1.93% over the holiday period. The yield curve (i.e., 2-10s) ended the week about 3 basis points flatter at +26 after reaching as high as +34 on New Year’s Eve, its steepest level since the summer of 2018.
Intermediate and long Treasury yields backed up last week to levels last seen in early November. The 10-year Treasury yield ended the week at just below 1.92%, almost 10 basis points higher on the week. While shorter-maturity bills and notes also sold off, their yields only rose by between 2 and 4 basis points, leaving the yield curve significantly steeper; the 2-10 year spread closed at +29, its widest level since June 21st of this year. The long-end selloff was driven both by a rise in real yields (i.e., rates without an inflation component, proxied by the 10-year TIPS yield) and a pickup in long-term expectations for inflation, with the 10-year TIPS break-even rate increasing by 6 basis points to 178 bps, its highest level since late July.
Treasury yields ended the week modestly higher, following a sharp rally earlier in the week. Surprisingly, Friday’s surprisingly strong employment report only pushed yields 2-3 basis points higher, while Fed Funds futures indicate a 40% likelihood of a Fed easing by the 6/10/20 meeting, down from a roughly 50% chance earlier in the week. The 10-year yield closed on Friday at just under 1.84%, about 6 basis points higher on the week, while the yield curve steepened; the closely-watched 2-10 spread widened by roughly 7 basis points to +22 bps, while the 2-5 year spread moved wider by about 3 bps. It is noteworthy that the yield curve has become significantly less “bowed” than it was in September and October.
The Treasury market was fairly quiet last week, with yields changing only modestly from the prior Friday. The 2-10 spread steepened by a couple of basis points to +16 bps, while the 2-5 year spread moved back into positive territory.
The Treasury curve underwent a notable bull-flattener trade last week, as short interest rates moved higher while intermediate and long Treasury yields dropped. The 10-year note closed at a 1.77% yield last week, a week/week decline of 6 basis points, while the yield on the 2-year note rose by just under 2 basis points to 1.63%. The yield curve “twist” left the 2-10 year spread flatter by 8 basis points, while the 2-5 year spread re-inverted (by a half basis point).
Treasuries rebounded last week, as the longer end of the yield curve recovered some of the ground lost earlier in the month. The yield on the 10-year note declined about 11 basis points on the week, closing at 1.83%, while the 5-year yield dropped by just under 10 bps. The rally in long Treasuries primarily reflected a re-assessment by traders of potential future inflation risks, as the 10-year TIPS break-even declined by 9 basis points.
Treasuries yields were lower at the end of a fairly volatile week. Bonds began the week with two straight sessions of lower prices, but bounced back after Wednesday’s rate cut by the Fed, along with what was viewed as a dovish press conference by Fed Chairman Powell. Despite a relatively strong employment report on Friday, the yield on the 10-year note ended the week about 8.5 basis points lower, while the best performer on the “coupon curve” (i.e., coupon-paying Treasury notes and bonds) was the 30-year bond, the yield of which dropped by about 10 basis points on the week.
Treasury yields continued their relatively slow back-up this week, leaving the yield on the 10-year note at its highest level since mid-September. The 10-year yield has moved about 27 basis points higher since early October, and closed just shy of the 1.80% level. The Treasury selloff also took place amid a backdrop of declining volatility; the 40-day standard deviation of the 5- and 10-year notes’ daily changes has dropped roughly a full basis point since late September. The uptick in rates also left the entire Treasury curve into positive-sloping territory, with the closely-watched 3mo/10-year and 2-year/10-year spreads at +16 and +17, respectively.
Treasury markets were fairly quiet last week, leaving the yield on the 10-year at 1.755% at Friday’s close, up about 2.5 basis points on the week. The yield on the 2-year note declined modestly on the week, leaving the 2-10 year spread (which closed at +18 basis points) at its widest level since late July. The relatively placid trading after the end of the third quarter is reflected in the realized volatility of the 5- and 10-year Treasury notes; as highlighted by the accompanying chart, the 40-day standard deviation of both notes has declined by almost a full basis point over the last few weeks. (For context, this equates to a difference in daily price changes of about 3/32nds on the 10-year note. It’s also notable that the standard deviations remain high relative to their levels in 2016, which reflected both the summer Brexit vote and the Presidential election.) The money markets appear poised for another Fed easing at the 10/30 meeting, with the Fed Funds futures market projecting an 87% probability of a 25 basis point cut in the funding target range.
Treasury yields moved lower last week, reflecting growing concerns over the economic outlook as well as equity market woes. The yield on the 10-year Treasury note declined by 15 basis points on the week, while the 2-10 Treasury spread widened by about 7 basis points to +12 bps. The rally in Treasuries was a bit aberrant compared to other sovereign debt, as yields for the major European countries, as well as Japan, were little changed on the week. The Fed Funds futures market currently projects around a 70% chance of an easing at the next Fed meeting on 10/30, up from less than a 50% market-implied probability at the end of September.
Treasury rates dropped last week, reversing the previous week’s selloff and pushing yields significantly lower. The 10-year yield ended Friday at 1.723%, dropping by about 17 basis points on the week, although it remains well above the 1.46% level last seen immediately after the Labor Day holiday. The Treasury yield curve (2-10s) flattened by about 6 basis points to just inside +4 basis points, while the 2-5 spread further inverted to -8.5 basis points. The continued volatility of the market was reflected in the 40-day trailing daily standard deviation of the 5- and 10-year Treasury notes, which reached 6 basis points by Friday, its higher level since mid-2015.
Treasury yields shot higher last week, rising by 25-35 basis points to leave the 10-year yield just inside of 1.90%. The Treasury yield curve also steepened noticeably, as the 2-10 year spread widened by almost 8 basis points while the 2-5 year spread, while still negative, improved by about 6 basis points. While other sovereign yields also moved higher, the selloff in US Treasuries was more pronounced; as an example, the spread between the US and German 10-year notes widened by about 20 basis points week/week. Despite the selloff, the Fed Funds futures market continues to trade as if a cut in the target rate is a virtual certainty at the OMC meeting this week, with a projected 95% probability that the target range will move to 1.75-2.0%.
After bottoming out after the Labor Day holiday, Treasury yields rose later in the week on a combination of equity market strength, optimism on renewal of trade talks with China, and a fairly strong Employment report. The 10-year yield closed 6 basis points higher to end the week at 1.56%, while the 2-year rose by just under 4 bps, leaving the 2-10 spread at +2 bps. Despite last week’s move (as well as this morning’s continued upward push in rates), the Fed Funds futures market suggests that a Fed rate cut is fully priced in for the 9/18 meeting. This is meaningful because money market rates remain significantly higher than Treasury yields, as highlighted by the chart below, and is one of the factors that has pushed TBA carry lower (and many rolls into negative territory). It’s likely that more cuts in the Fed Funds target rate will serve to pressure money market rates lower.
Treasury rates plunged last week after the announcement of a cut in the Fed Funds target rate on Wednesday was followed by an escalation of the trade fight between the U.S. and China. While the entire Treasury curve rallied, intermediate and long Treasuries had the best performance, with yields dropping between 19 and 22.5 basis points week/week. The rally left the 2-10 year spread at +13.4, its tightest level since last December, while the 2-5 year spread inverted again and closed the week at around -5.5 bps. Money market rates were mixed, however, as 1-month LIBOR was virtually unchanged while SOFR (a market-based overnight rate) went from 2.41% on 7/26 to a high of 2.55% on July 31st (possibly distorted by month-end pressures) to end up at 2.19% on Friday. Overseas rates also plunged, leaving the entire German sovereign curve (including their 30-year bond) at negative yields.
The Treasury market meandered around last week, although the week/week changes belied some noteworthy mid-week price volatility. The 10-year note ended the week yielding 2.07%, only about 1.5 basis point higher than its 7/19 close, but the note’s yield ranged from a low of 2.045% to a peak of 2.082%. The yield on the 2-year note was somewhat steadier, although it popped by about 5 basis points on Thursday, leaving the 2-10 year spread just under 2 basis points flatter at +21.7 bps.
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 mid-May. The 10-year Treasury yield closed on Friday at 2.125%, 27 basis points lower than its close on 5/17 and more than 110 bps lower than at the cycle highs in early November. View MBS Weekly Market Profile Report *The...
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 week punctuated by a Fed meeting and the April employment report. The 10-year yield ended the week at 2.526%, just under 3 basis points higher than where it closed on April 26th. View MBS Weekly Market Profile Report...
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