Bond Market Update

Short End Reverses

• U.S. Treasuries have dipped from their morning highs with 10s and 30s finding support just above their opening levels while the 2-yr note has reversed notably, turning negative for the day. The underperformance in the front end is exerting some pressure on rate cut expectations, though at 64.4%, the fed funds futures market remains fairly confident that another 25-basis point reduction will be announced in December, though the implied likelihood of that move is down from 69.0% that was seen yesterday and 82.7% just a week ago. The intraday dynamic is setting the stage for a mixed finish for the week with the 2-yr yield currently up four basis points from last Friday's settlement while the 10-yr yield is down six basis points after a jam-packed week that was rife with earnings, election results, and the latest FOMC Decision. The 2s10s spread has tightened by ten basis points this week and it is now sitting at just six basis points.
• Yield Check:
  • 2-yr: +2 bps to 4.24%
  • 3-yr: UNCH at 4.18%
  • 5-yr: -2 bps to 4.18%
  • 10-yr: -5 bps to 4.30%
  • 30-yr: -7 bps to 4.47%