October 7, 2022

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10-Year Treasury yields soar as investors watch bond spreads

10-Year Treasury yields soar as investors watch bond spreads

US Treasury yields rose mostly on Wednesday morning, with investors watching the spreads between bonds, after 5-year and 30-year interest rates flipped at the start of the week.

return on 5 years treasury It rose less than a basis point to 2.493% at 7:00 AM ET, while the rate on 30 year treasury bonds It added 1 basis point to 2.533%. return on standard 10-year treasury bonds It rose about 2 basis points to 2.416%. Returns move inversely with prices and one basis point is 0.01%.

The yield on the 5-year Treasury rose above the 30-year US government bond yield on Monday for the first time since 2006, but that reversal faded on Tuesday.

Yield curve inversions have historically occurred before recessions, although it is the 10-year difference that traders consider most important. That spread became flat on Tuesday, according to CNBC data, while other sources showed the curve briefly flipping.

Antoine Buffett, chief price analyst at ING, told CNBC:Squawk Box EuropeOn Wednesday, he said he did not think the moves in the yield curve indicate that ‘a recession is inevitable, fortunately.’

“But clearly there is a risk and that risk increases when you take into account the Fed’s almost commitment to raise rates into restricted territory, at a time when some quarters of the economy are showing signs of slowing down and this is clearly something that needs to be done. [on] minds of investors.

On Wednesday morning, the 2-year Treasury yield was slightly lower while the 10-year Treasury was up, easing concerns about a reversal.

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The Russo-Ukrainian war has already driven up inflation, which investors worry could affect economic growth.

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Morale was boosted on Tuesday after negotiations between Russian and Ukrainian officials in Turkey, with Russia’s deputy defense minister claiming that Moscow had decided “significantly” to reduce its military activity near the Ukrainian capital.

Russia had begun moving some of its forces from Kyiv to elsewhere in Ukraine, but Pentagon press secretary John Kirby warned on Tuesday that those Movements do not reach the point of undo.

In addition to keeping an eye on developments in this geopolitical crisis, economic data updates also remain the focus of investors.

Payroll services company ADP is due to release its March employment change report at 8:15 a.m. ET on Wednesday.

The final reading of the fourth quarter of US GDP is scheduled to be released at 8:30 AM ET.

An auction of $30 billion of 119-day notes is scheduled for Wednesday.

CNBC’s Jesse Pound and Holly Eliat contributed to this market report.