Short-term yields, impacted by changes in Fed policy, have been anchored in place in recent months as Chair Jerome Powell led his colleagues in three increases to the overnight lending rate. In contrast, inflation and economic expectations dictate the movement of long-term rates; investors estimate how much they should be compensated beyond inflation for holding government debt over several years.
The difference between the 5-year Treasury inflation-protected securities, or TIPS, and the corresponding Treasurys hit 1.72 percentage points last Tuesday. That spread is a practical look at the market's projection of where inflation is heading, and is down from highs over 2 percent in October. The closely followed spread between the 2-year Treasury note yield and the 10-year Treasury note yield remains positive.
There has been "a tremendous move in the long-end as short rates have hardly moved and 30-year bonds are up five-eights of a point. I believe a lot of this move is a function of portfolios liquidating credit and equity exposure in favor of
long-dated Treasurys," wrote Tom di Galoma, head of Treasury trading at Seaport Global Holdings.
"The move into the long-end is also recessionary (12-18 months out) as the curve continues it way towards full inversion of the 2-year, 10-year spread," he added.
The yield on the benchmark 10-year Treasury note fell 7 basis points to 2.915 percent at around 4:38 p.m. ET, while the benchmark on the 30-year Treasury bond was also lower, trading at 3.17 percent. Bond yields move inversely to prices.