U.S. Treasury yields dipped on Wednesday morning, but investors continue to watch the spreads between bonds, after the 5-year and 30-year rates flipped at the start of the week.
The yield on the 5-year Treasury moved 3 basis points lower to 2.4499% at 4:15 a.m. ET, while the rate on the the 30-year Treasury bond declined 3 basis points to 2.4912%. The yield on the benchmark 10-year Treasury note fell 2 basis points to 2.3707%. Yields move inversely to prices and 1 basis point is equal to 0.01%.
Treasurys
The yield on the 5-year Treasury rose above that of the 30-year U.S. government bond on Monday for the first time since 2006, and remained inverted in early trading on Tuesday.
Yield curve inversions have historically occurred prior to recessions, though it is the spread between the 2-year and 10-year that is considered more important by traders. This spread effectively became flat on Tuesday, according to CNBC data, while other sources showed the curve briefly inverting.
Antoine Bouvet, senior rates strategist at ING, told CNBC’s “Squawk Box Europe” on Wednesday that he didn’t think the moves in the yield curve indicated that “recession is inevitable, fortunately.”
“But clearly there’s a risk and that risk is increasing when you take into account the Fed committing almost to raise rates to restrictive territory, at a time when some quarters of the economy are showing signs of slowing down and clearly that is something that needs to be [on] investors’ minds,” he said.
The Russia-Ukraine war has been driving already rising inflation higher, which investors are concerned could weigh on economic growth.
Sentiment was boosted on Tuesday following negotiations between Russia and Ukraine officials in Turkey, at which Russia’s deputy defense minister claimed Moscow had decided to “drastically” cut back its military activity near Ukraine’s capital.
Russia had begun to move some of its troops away from the city of Kyiv to elsewhere in Ukraine, but Pentagon Press Secretary John Kirby warned on Tuesday that these movements do not amount to a retreat.
In addition to monitoring developments in this geopolitical crisis, economic data updates also remain in focus for investors.
Payroll services firm ADP is due to release its March employment change report at 8:15 a.m. ET on Wednesday.
The final fourth-quarter reading of U.S. gross domestic product is set to be released at 8:30 a.m. ET.
An auction is scheduled to be held on Wednesday for $30 billion of 119-day bills.
— CNBC’s Jesse Pound and Holly Ellyatt contributed to this market report.
