Bonds Lean Lower in Quiet Trade

U.S. Treasuries consolidated at lower levels Wednesday, little changed in quiet activity ahead of the 2 p.m. ET release of the minutes from the Dec. 13-14 Federal Open Market Committee meeting. While the minutes will be of interest, the week’s (and month’s) marquee event will be the December employment report due Friday. Traders note the market will be “swimming upstream” with pressure from increasing global inflation expectations and resulting from hedging related to new corporate debt offerings.

The 30-year recently traded either side of unchanged at 3.05% from a high yield/low price overnight at 3.0735%. The 10-year is near 2.46% from 2.477% overnight and a close near 2.455% Tuesday. The five-year is pushing the 1.95% level versus a 1.9785% low and close near 1.945%. The two-year has straddled the 1.23% point against a low of 1.245% and close near 1.22%.

The curve trade has been tightening along a flatter slope with the yield spread between the two- and 10-years near 1.22 from near 1.23 Tuesday, while the yield differential between the five- and 30-years narrowed to 1.09 plus from 1.10 plus.

By Travis Berry