Treasury Curve Steepens as Microsoft Issue Includes 40-Year Debt

  • Accouncement of 7-part deal weighs on long Treasuries
  • Short end benefits as stocks fall on U.S. immigration policies

The Treasuries curve steepened Monday as a $17 billion bond offering by Microsoft Corp. drove up 30-year yields, while shorter maturities benefited from a global equity selloff spurred in part by concern over U.S. immigration policies.

U.S. long-bond yields rose as much as 3.1 basis points to about 3.09 percent and were up about 2 basis points at 3:27 p.m. New York time. Shorter maturities were little changed, off lows reached concurrently with U.S. equity benchmarks.

The spread between 5- and 30-year yields topped 114 basis points for the first time this year.

  • Microsoft headlined Monday’s corporate issuance slate; Apple, which sold bonds in February each of the past 2 years, reports 1Q results after Tuesday’s close
  • UST 30-year yield reached session high at about 8am ET, minutes after the Microsoft offering was announced; yields across the curve moved higher as the deal was sized and launched
  • Shorter-maturity yields reached session lows as U.S. stocks fell led by software companies, reflecting potential for workforce disruptions related to immigration restrictions Trump administration imposed
  • Developed sovereign yields were mixed globally; Italian 10Y yield rose nearly 10bp to highest in more than a year as supply weighed, while U.K. and core euro-zone yields declined with European stocks
  • Italian and French spreads vs Germany reached widest levels since 2014, in part reflecting potential for elections to bring anti-euro leaders to power
  • UST curve faces near-term pressure from month-end index extensions; focus should then shift to steepening potential associated with next week’s quarterly refunding
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