Treasury Yield Curve Resumes Steepening After Weak Bond Auction
- Five- to 30-year spread recovers most of a 6-basis-point drop
- Poor demand for 30-year bond sale at lowest yield in months
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The Treasury yield curve was subject to notable volatility Tuesday. Weak demand for the monthly 30-year bond auction unleashed a bout of steepening that reversed a flattening move spurred by hot June inflation readings.
As the consumer price index data emboldened traders to bet that the Federal Reserve will tighten policy in early 2023, spurring five-year yields higher, the gap with 30-year yields narrowed to less than 114 basis points, approaching the slimmest levels of 2021, reached last month. After the auction, it widened back toward 120 basis points, remaining well below an over six-year high of 167 basis points reached in February.