“The bond market is now pretty convinced of a tight monetary policy stance from the Fed and will continue to see rates gravitate higher,” said Kim Rupert, managing director of global fixed income research at Action Economics.
The 10-year Treasury bond yield rose 5.1 basis points to 2.368%. But the gap between its return and that of the two-year debt, a sign of economic growth or stagnation, widened to 20.8 basis points.
Previously, the closely watched gap or curve narrowed to just 13.56 basis points, a sharp flattening from this year’s high of 92 on Jan 10. An inverted curve, when the two-year yield is higher than the 10-year yield, may indicate a recession in the future.
The market is pricing in a 72.2% chance that the Fed will raise interest rates by 50 basis points in May., and only 27.8% expect a rise of a quarter of a percentage point. The odds of a further increase rose from just over 50% on Monday.
Two-, five-, 10- and 30-year bond yields rose on Tuesday to hit their highest since 2019.
The two-year yield, which generally moves in step with interest rate expectations, rose 2.4 basis points to 2.158%.
Source: Ambito
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