Thursday, August 18

US yields fall for 2nd day; 2/10 yield curve most inverted since at least 2010


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NEW YORK — US Treasury yields headed

lower for a second straight session on Tuesday, taking their cue

from stocks with both the S&P 500 and the Nasdaq index down, as

growth slowdown concerns continued to funnel investors to

safe-haven government bonds.

The benchmark US 2/10 yield curve remained inverted for a

fifth consecutive day, with the two-year yield exceeding that of

the 10-year by as much as 12 basis points. That’s

the largest inversion since at least March 2010, according to

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Refinitiv data. It was last at -8.9 bps.

Other banks saw a slightly different level of inversion for

the 2/10 spread. BMO Capital said the 2s/10s pushed as low as

-10 bps, the most inverted spread since February 2007.

“The combination of monetary policymakers’ hawkish

conviction, building economic slowdown concerns, and an emerging

interest in buying duration has led to further curve

compression/inversion,” wrote BMO strategists Ian Lyngen and Ben

Jeffery wrote in a research note.

In late morning trading, US benchmark 10-year yields were

down 8 bps, at 2.9078%.

The US Treasury will auction 10-year notes later on

Tuesday.

Wells Fargo rates strategist Zachary Griffiths, in a

research note on Tuesday, said he expects weaker demand for the

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10-year note, given that the yield has fallen roughly 10 bps

from the previous auction clearing level and has “richened

Considerably Treasury versus 5s and 30s since the last auction.”

He also noted that US 10-year notes have become less

attractive to foreigners on an FX-adjusted basis.

Griffiths, for instance, pointed out that 10-year Treasuries

currently offer a euro-based investor roughly 100-bps less than

the 10-year German bund when hedging the first three months of

FX risk.

US 30-year bond yields were down 7.6 bps at 3.104%

On the short end of the curve, US two-year yields dropped

6 bps to 3.012%.

July 12 Tuesday 10:39AM New York / 1439 GMT

Price Current Net

Yield % Change

(bps)

Three-month bills 2.1275 2.1688 -0.002

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Six-month bills 2.695 2.7702 -0.003

Two-year note 99-245/256 3.0223 -0.048

Three-year note 99-216/256 3.0549 -0.048

Five-year note 101-42/256 2.9957 -0.054

Seven-year note 101-140/256 3.0021 -0.062

10-year note 99-152/256 2.9225 -0.069

20-year bond 98-96/256 3.3627 -0.068

30-year bond 95-120/256 3.109 -0.071

DOLLAR SWAP SPREADS

Last (bps) Net

Change

(bps)

US 2-year dollar swap 24.00 -1.25

spread

US 3-year dollar swap 5.50 -1.25

spread

US 5-year dollar swap 1.00 -0.75

spread

US 10-year dollar swap 7.75 -0.25

spread

US 30-year dollar swap -26.00 -0.75

spread

(Reporting by Gertrude Chavez-Dreyfuss

Editing by Nick Zieminski)

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