Treasury Action: the 7s-10s spread is modestly wider at 4.1 bps
Treasury Action: the 7s-10s spread is modestly wider at 4.1 bps as the long end of the curve underperforms. But, next week's supply, along with month- and quarter-end next week could see the curve invert. The spread dropped to 2.9 bps last week, which was the smallest going back to 2009 when the 7-year maturity was reintroduced on the Treasury's financing schedule. The year's wide is 10 bps. Meanwhile, the Treasury will auction 2-, 5-, and 7-year notes next week, and any auction set up, and/or tepid demand could see yields rise. Additionally, it's month- and quarter-end next week and that augers for some demand for duration. Barclays estimates its July 1 Treasury index extends out 0.06 years, fractionally below the 0.07 year versus July 2017, but is in line with the 10-year average. There's concern that this spread will be the harbinger of further tightening and eventual inversion in the 2s-10s and/or 5s-30s spreads, which are currently trading in the 34 bp and 26 bp regions, respectively. The FOMC has clearly noted the narrowing curve trends, but most have cautioned against reading too much into a possible inversion, which last time it occurred presaged the financial crisis and the Great Recession.