Yield on 30-Year Treasuries Tumbles as Curve Continues to Flatten

This week’s aggressive repricing in U.S. Treasuries is going global, with long-end borrowing costs from Germany to the U.K. sliding as traders brace for central banks to quell fears over rising inflation.

The yield premium on 30-year German bonds over five-year equivalents narrowed to the lowest since March on Friday, while a similar gauge in Britain fell to levels last seen in January. It follows a plunge in long-term Treasury yields on Thursday, which sparked the biggest two-day flattening of curve since March 2020.

The moves come after Federal Reserve officials on Wednesday signaled they could tighten monetary policy sooner than expected, boosting the appeal of longer-dated debt, which has borne the brunt of this year’s bond selloff on fears that inflation might become unmoored.

The 30-year German yield fell two basis points Friday, dropping for a third day to 0.27%. taking the spread over the five-year note to as low as 86 basis points. The yield on equivalent U.K. securities slumped three basis points, the most in over a week, bringing the spread over five-year gilts to 84 basis points.

The plunge in U.S. long-end yields comes after new forecasts released Wednesday by central bank officials indicated two rate hikes by the end of 2023, a shift that’s driven up market rates in shorter maturities and put a check on longer-term inflation expectations.

I know you are using hyperbole to make a point. However, I do think in reality there will be 8 additional federal holidays created in the next 4 years:

1. Mexican heritage day of some sort (Cinco De Mayo perhaps?)
2. A general Hispanic day because many Hispanics will not like a Mexican holiday only.
3. Indigenous peoples day (too much heat to eliminate Columbus Day altogether, so new day)
4. Japanese Americans day - (to atone for the internment in camps and the atomic bombs dropped on Japan).
5. Asian Americans Day - could come before the Japanese one, but I don’t think so.
6. LGBTQ+ Day - (will be too much of a catch all and homosexual men and women will want their own special one)
7. To tighten the focus the Stonewall date will serve as Homosexuals day in addition to the LGBTQ+ Day above
8. Earth Day will become an official Federal holiday to focus on Climate Change - will be a somber one like Memorial Day is supposed to be.

Other changes:

1. Christmas becomes Religious Observance Day to recognize all world religions. Possible date change to the 20th or some such crap.
2. Presidents Day becomes general Government office holder recognition day, recognizing the incredible importance of elected officials, and government workers from the federal to the local levels.
3. July 4th becomes “World Citizen Celebration” day. Recognizing the importance of everyone coming together for the common good.

Probably more, but I am out of time.

“a shift that’s driven up market rates in shorter maturities and put a check on longer-term inflation expectations”

The fed had shifted nothing.

It’s passions and fears that are causing the very slight changes in US bond yields.

Announcing they might increase 0.0% to 0.50% in 2023 signals they are going to keep the spigot wide open.

“Remember the good old days when you could earn 10% APR on a 90 day CD?”

You can do better today by taking out a 2%, 30 year mortgage with as little money down as you can get away with. And buying another house with it.

And go big with it, as much as they’ll let you borrow.

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