Treasury Action: yields remain at their cheapest levels of the session
Treasury Action: yields remain at their cheapest levels of the session as risk appetite surges. And the action is partly circular, as the rise in rates and the steepening of the curve is helping diminish fears of a recession that were exacerbated by the Fed's March stance and dive in bond rates. Longer dated maturities are underperforming with the 10-year testing the key 2.56% level, while the 2s-10s spread has widened to 16 bps. The 3mon-10year gap is now at 12.2 bps, the widest since March 19, the day before the FOMC's policy announcement, after which the spread inverted and remained so for five sessions. Analysts believe the Fed, and the IMF for that matter, became too pessimistic in late 2018 and early 2019, leading to the FOMC removing a rate hike from this year, and the IMF to downgrade outlooks twice so far this year. Next week's data on retail sales, production, and trade should help brighten the picture on growth, while earnings may beat given the low bar.