Treasury yields remain stable while the 2-10 year spread narrows to just 6 basis points

US Treasury yields eased slightly on Tuesday as the widely followed 2-10 year yield spread neared inversion.

Yield Movements
  • The yield of the 10-year Treasury note TMUBMUSD10Y,
    was 2.395%, compared to 2.476% at 3:00 p.m. ET Monday.

  • The yield of the 2-year Treasury Note TMUBMUSD02Y,
    was up 2.34%, up from 2.34% on Monday afternoon, which was the highest since May 2, 2019 based on 3 p.m. levels, according to Dow Jones Market Data.

  • The yield of the 30-year government bond TMUBMUSD30Y,
    was up 2.499%, up from 2.572% late Monday.

market leader

The 10-year Treasury yield traded just 6 basis points above the 2-year yield on Tuesday morning, with the spread narrowing from nearly 14 basis points on Monday afternoon. If the 2-year yield is trading above the 10-year yield, it would represent an inversion of this measure of the curve, a level that has been a reliable harbinger of past recessions, albeit with a lag.

Read: Investors need to know that the yield curve is moving towards inversion

All three major stock indexes rose Tuesday morning, with optimism over Russia-Ukraine ceasefire talks being attributed to improving sentiment. In negotiations, Russia said it would scale back operations near Kyiv to “boost confidence”.

Buying of government bonds with maturities of 3 to 30 years returned after a sharp sell-off last week as investors planned a faster and more aggressive round of interest rate hikes from the Federal Reserve. On March 21, Fed Chair Jerome Powell left the door open for rate hikes of more than 25 basis points, or a quarter of a point – a prospect echoed by some other policymakers.

In a chart: “Finally the dam has burst”: 10-year government bond yields are rising, breaking the top of the downtrend channel observed since the mid-1980s, says Deutsche Bank

In US economic data, the S&P CoreLogic Case-Shiller 20-city price index rose 19.1% year-on-year in January, up slightly from 18.6% the previous month. Job listings in the US fell to 11.27 million in February from 11.28 million a year earlier. And the Conference Board Consumer Confidence Index for March came in at 107.2, slightly below economists’ median expectation.

Philadelphia Fed President Patrick Harker will speak at 10:45 a.m. while Atlanta Fed President Raphael Bostic will speak at 6:30 p.m. The Treasury Department will also auction $47 billion worth of 7-year Treasury bills.

It’s a busy week for jobs data, including Automatic Data Processing’s Wednesday estimate of private sector job creation in March and the Labor Department’s official March jobs report on Friday.

What Analysts Say

“The main talking point is likely to be the ongoing, rapid flattening of the U.S. yield curve, which threatens to invert for the seventh time since I started looking into it in the 1980s,” said Kit Juckes, macro strategist at Société Générale, in a Tuesday note.

“Only one of them, the tiny inversion in 1998, was not followed by a recession. The caveat to the whole inversion/recession debate is that never before have yield curves been distorted to the present extent by the shenanigans of quantitative easing. Still, it seems silly to just ignore the message the bond market is sending,” he wrote. Treasury yields remain stable while the 2-10 year spread narrows to just 6 basis points

Brian Lowry

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