Summary: Has gravity flipped? Up is down and down is up? Go figure:
4.27.23 --10 year 3.53%
5.3.23 -- the Fed made an announcement that broadly hinted that future rate increases would be in a "wait and see mode."
6.2.23 -- Debt ceiling agreement
6.13.23 -- CPI materially improves from 4.9% to 4.0%
6.14.23 -- Fed did NOT change rates, first time in 15 months
6.22.23 -- 10 year 3.85%
If rates go up when we have very good news, what would have happened if it were bad?
For the past 2 weeks, 10 Year Treasury rates were up 2bp Past week: up 8bp. On 5.3.23 the Fed made an announcement that broadly hinted that future rate increases would be in a “wait and see mode. CPI was down from 4.9% to 4.0% on 6.13..23 and 6.14.23 Fed did not increase rates, for the first time in 15 months.
The red line is the most current rates while the green line is from one week ago. The entire yield curve increased. 2-year term increased 10bp with 10 year up 5bp. This made the inverted yield curve steeper. One-month rates were up 7bp.
Volatility in the one-month Treasury market has diminished in the past few weeks. With the inverted yield curve, any firm borrowing short to fund longer-term assets is going to be stressed: mortgage banking firms and bond investment firms? Note the muted reaction on the one-month rates to the news regarding the improved CPI and Fed holding rates unchanged.