Treasury Curve Collapses as Fed-Induced Bond Selloff Escalates

Treasuries extended a selloff sparked by Wednesday’s Federal Reserve meeting, when policy makers raised rates and hiked projections for how much the central bank’s target is likely to climb in coming years.

  • Yield curve, measured by gap between five-, 30-year yields, has flattened 20 basis points in past three days, most for such a span in more than seven years. The Fed’s move has added to speculation that a shift is under way to fiscal stimulus rather than central-bank policy as driver of global growth. The swing in sentiment has helped fuel a rally in stocks and a rout in global bonds since U.S. election.
  • Treasuries came under renewed pressure after ~$400k/DV01 block sale in 10-year futures posted
  • 5s30s curve extends sharp flattening this week, biggest three-day narrowing since June 2009
  • Curve breaches 105 basis points, lowest since Sept. 2
  • Long end advanced relentlessly despite UnitedHealth Group sale of $1.5 billion of debt offering split between 10-, 30-year tranches
  • Ten-year yield at 2.6 percent after reaching 2.64 percent
  • U.S. jobless claims fall to a three-week low of 254,000.

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