Despite June Hike Talk, Treasury Yields Barely Moved

Bloomberg says a Treasuries Weekly Slide Is Most Since November on Fed Outlook.

In contrast, Curve Watchers Anonymous notes treasury yields barely moved.

A couple of pictures can help clarify things.

US Treasury Yield Curve Monthly Chart

US Treasury Yield Curve Monthly Chart

Inverted Action

Yield on the long bond rose a trivial 3 basis points.

Bloomberg noted the 2-year yield “surged 13 basis points this week, the biggest climb since the week ended Nov. 6. The 10-year note yield rose 14 basis points this week, also the most since November.”

It’s pretty amazing that the biggest weekly bond selloff in half a year is a measly 14 basis points.

The real story, that Bloomberg missed completely, is the short end of the curve is rising faster than the long end.

If the economy was truly strengthening, the long end of the curve would be rising far faster than the short end as more hikes get priced in.

The actual action is recessionary-looking. If the Fed manages to get in a couple hikes (I am still extremely skeptical), the already compressed yield curve is likely to get flatter and flatter.

Anyone smell a “reverse operation twist” in a first-ever attempt to force up the long end of the curve up?

A flat yield curve is not conducive to increased bank lending or bank profits. So let’s see how many hikes the Fed gets in.