Updated: 08-07-2020

U.S. Treasury yield spreads saw limited movement during the past week. The 2s10s spread narrowed by just a basis points to 44 bps while the 2s30s spread held at 109 bps. The slight tightening took place as Treasuries of all tenors rallied with shorter tenors leading the way. Meanwhile, the U.S. Dollar Index touched its lowest level since mid-May 2018.

Corporate spreads tightened for the fifth week in a row, though the movement was minor. The high yield spread narrowed by six basis points to 548 bps while the investment grade spread tightened by a basis point to 108 bps. These spreads are approaching their lowest levels since the end of February. 

The yield spread between Germany's 10-yr bund and the U.S. Treasury 10-yr note decreased by four basis points to -112 bps, undoing its move from the previous week.

The 5y5y forward rate rose three basis points to 1.71%, reaching a fresh five-month high. Weakness in the dollar contributed to the uptick in inflation expectations. However, the 5y5y forward rate remains 17 bps below its high from early January.

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

7/31/2020 7/24/2020 Change
Fed Fund Futures Rate Prediction N/A N/A  NA
10yr Treasury - 2yr Treasury  44 bps  45 bps -1 bp
High Yield - 10yr Treasury  548 bps  554 bps -6 bps
Corp A - 10 Year Spread  108 bps  109 bps -1 bp
10 yr Bund - 10 yr Treasury -112 bps -108 bps -4 bps
5yr, 5yr Forward Inflation Breakeven 1.71% 1.68% +3 bps

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