Updated: 07-06-2020

U.S. Treasury yield spreads expanded over the past week as Treasuries of longer tenors underperformed after showing relative strength during the previous week. The 2s10s spread widened by five basis points to 52 bps while the 2s30s spread expanded by seven basis points to 127 bps.

Corporate spreads tightened a bit after expanding two weeks ago. The high yield spread narrowed by 20 basis points to 612 bps while the investment grade spread narrowed by seven basis points to 122 bps. These spreads continue hovering near levels from early March. 

The yield spread between Germany's 10-yr bund and the U.S. Treasury 10-yr note remained at -113 bps.

The 5y5y forward rate jumped eight basis point to 1.61%. The inflation gauge, which remains 24 bps below this year's high, continues pointing to expectations for disinflation, though the market will be curious to see if last week's increase is extended.

The fed funds futures market does not expect any changes to the fed funds rate range over the next year. 

7/3/2020 6/26/2020 Change
Fed Fund Futures Rate Prediction N/A N/A  NA
10yr Treasury - 2yr Treasury  52 bps  47 bps 5 bps
High Yield - 10yr Treasury  612 bps  632 bps -20 bps
Corp A - 10 Year Spread  122 bps  129 bps -7 bps
10 yr Bund - 10 yr Treasury -113 bps -113 bps UNCH
5yr, 5yr Forward Inflation Breakeven 1.61% 1.53%  8 bps

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