The S&P 500 index saw a 1.8% increase, while U.S. Treasury yields continued to rise, leading to a flattening yield curve. This movement was influenced by a selloff in German bonds during the London session and hedging activities related to corporate bond issuances, which heightened the upward pressure on U.S. Treasury yields. Traders anticipate approximately $35 billion in corporate bond issuances next week, with 10 to 15 issuers potentially entering the market soon.
Shortly after 3 PM in New York, U.S. Treasury yields rose across the board by 2.5 to 5.5 basis points. The yield curve experienced a bearish flattening, with the 2s10s and 5s30s yield spreads narrowing by 1.8 and about 3 basis points, respectively. The 10-year Treasury yield hovered around 4.305%, nearing its intraday high and the upper limit of its weekly range of 4.15% to 4.35%.
The selloff in French and German bonds during the U.S. morning session exerted additional pressure on U.S. Treasuries. This followed an agreement between Germany's conservative leader Merz and the Green Party on a debt-financed spending plan, which pushed the yield on France's 30-year bonds to its highest level since 2011.
Swap spreads widened for the fourth consecutive day, a trend that began earlier this week following reports that President Trump would nominate Federal Reserve Governor Michelle Bowman as the next Vice Chair for Supervision at the Fed.
In the Treasury options market, early trading indicated a preference for protecting against a more severe bond market selloff. There was notable activity in put options for 10-year Treasuries expiring in April and May.
As of 3 PM Eastern Time, the 2-year Treasury yield stood at 4.0128%, the 5-year at 4.0805%, the 10-year at 4.3063%, and the 30-year at 4.6122%. The yield spread between the 5-year and 30-year Treasuries was 53 basis points, while the spread between the 2-year and 10-year Treasuries was 28.93 basis points.
