Treasury Action: curve flattening remains intact
Treasury Action: curve flattening remains intact with the 2s-10s spread slipping 2 bps to 46 bps. It's in from 50 bps to start the week, and is testing the 2007 narrows of 45.7. Several factors remain in play, though part of the outperformance of the long end today was the dip in the inflation reading from the April consumer sentiment report. The rise to 2.837% Thursday also provided an attractive buying level. Meanwhile, that the Treasury didn't include any further questions on long end issuance in its agenda for the Dealer Meeting ahead of the May refunding also supported with the 10-year note stabilizing in the 2.82% area through the afternoon and the 30-year around the 3.02% level. The short end of the curve has been unable to take advantage of some flight to quality flows, and instead remains encumbered by the hawkish Fed policy tilt, especially after Rosengren (a nonvoter) advocated for more than 3 tightenings this year. Supply is also weighing on the front end. Bill volumes remain high, despite recent cut back ahead of the tax date, while the 2-year and 3-year notes have been boosted by $4 B and $6 B, respectively, so far this year, and further increases are expected ahead.