A month ago, 10-year yields were at 2.89%. And so, we were at a level that yields had been on February 20th despite two rate hikes in the intervening period. Since that time, rates have shot up 10 basis points, with the 10-year briefly crossing the 3% threshold earlier today. What are we to make of this?
1 - Look at the short-end, but not the very short-end
If you look at the 2-year, we see a 15 basis point uptick in the same time frame that 10-year rates have increased 10 basis points. So while some of the Fed's tightening has fed through to the long end, the curve is still flattening. Right now, we're at 21 basis points between the 2-year and the 10-year, whereas a week ago we were at 23 basis points. A month ago, the differential was 26 basis points.
It's the medium-term part of the cu...
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Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.