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Treasurys resumed a selloff Tuesday, pushing up yields, particularly for shorter dated maturities, and sending a measure of the yield curve closer to inversion, triggering a closely watched recession indicator.
Yield moves
-
The yield on the 10-year Treasury note
TMUBMUSD10Y,
2.506%
was 2.506%, compared with 2.476% at 3 p.m. Eastern on Monday. -
The 2-year Treasury note yield
TMUBMUSD02Y,
2.422%
stood at 2.419% versus 2.34% Monday afternoon, which was its highest based on 3 p.m. levels since May 2, 2019, according to Dow Jones Market Data. -
The yield on the 30-year Treasury bond
TMUBMUSD30Y,
2.573%
was at 2.59%, up from 2.572% late Monday.
Market drivers
The 10-year Treasury yield traded around 8 basis points above the 2-year yield, with the spread narrowing from just under 14 basis points Monday afternoon. If the 2-year yield trades above the 10-year, it would represent an inversion of that measure of the curve, a reading that has been a reliable precursor of past recessions, albeit with a lag.
Read: The yield curve is speeding toward inversion — here’s what investors need to know
Stock-index futures pointed to another round of gains on Wall Street, with optimism over cease-fire talks between Russia and Ukraine credited with lifting sentiment. Russian and Ukraine negotiators kicked off their first talks in two weeks in Turkey.
Yields rose sharply last week as investors penciled in a faster and more aggressive round of interest rate increases from the Federal Reserve after Chairman Jerome Powell on March 21 left the door open to rate increases of more than 25 basis points, or a quarter percentage point — a prospect echoed by some other policy makers.
The U.S. economic calendar features the 10 a.m. release of the February Job Openings and Labor Turnover Survey, or JOLTS, a closely watched gauge of labor market tightness. It’s a busy week for jobs data, including Automatic Data Processing’s Wednesday estimate of March private-sector job creation and the Labor Department’s official March jobs report on Friday.
A March consumer confidence reading from the Conference Board is also due at 10 a.m. Wednesday.
Ahead of that, investors get a look Tuesday at the January Case-Shiller national house price index at 9 a.m. The FHFA’s January national house price index is due at the same time.
Philadelphia Fed President Patrick Harker is set to speak at 10:45 a.m., while Atlanta Fed President Raphael Bostic delivers remarks at 6:30 p.m.
The Treasury Department is set to auction $47 billion of 7-year Treasury notes.
What analysts say
“The main talking point is likely to be the continued, rapid flattening of the U.S. yield curve, which is threatening to invert for the seventh time since I started caring about it in the 1980s,” said Kit Juckes, macro strategist at Société Générale, in a Tuesday note.
“Only one of those, the teeny-weeny inversion in 1998, wasn’t followed by recession. The caveat to the whole inversion/recession debate, is that yield curves never used to be distorted to the current degree by the shenanigans of QE. Still, it would seem silly to simply discount the message the bond market is sending,” he wrote.
