CBOT Action: Treasury Yields Spike, Curve Pierces Resistance

CBOT/LaSalle St - Chicago

Big day at the Chicago Board of Trade (CBOT). The 2-10 year Treasury yield spread pierced through resistance while yields spiked on 10-30 year money (10yr=3.69%, 30yr=4.6%). This action benefited the UltraShort 20+ Treasury ETF or $TBT which was up 3.76% on the day. I provided Bloomberg articles and charts below.
"Treasuries Fall on Concern Record Sales Will Overwhelm Demand

May 27 (Bloomberg) -- Treasuries fell for a fourth day, pushing the difference in yields between two- and 10-year debt to a record amid concern record supply will overwhelm investor demand as the economy begins to show signs of stability.

The slump in Treasuries is helping to send yields on mortgage bonds higher, prompting holders of the securities to sell government debt used as a hedge to protect portfolios against rising interest rates.

‘We are in a bit of a freefall,” said Kevin Giddis, head of fixed-income sales, trading and research at the brokerage Morgan Keegan Inc. in Memphis, Tennessee. “This is the beginning of a lot of sales.”" (More)

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"Treasury Yield Curve Steepens to Record as Debt Sales Surge

May 27 (Bloomberg) -- The difference in yields between Treasury two- and 10-year notes widened to a record on concern surging sales of U.S. debt will overwhelm the Federal Reserve’s efforts to keep borrowing costs low." (More)

2 to 10yr Yield Spread (Bloomberg.com)
10 Year Yield ($TNX) (Yieldx10)

30 Year Yield ($TYX) (Yieldx10)

$TBT (UltraShort 20+ Treasuries)


For an in depth look at Treasury flows and issuance data go to Brad Setser's blog at cfr.org (Council on Foreign Relations). Recent entry: The Treasury market, in a world no longer dominated by central bank reserve managers (Link)