Further Yield Curve Inversion “a Given”

Or so says the Treasurys team at Jefferies & Co. in New York.

I cannot say I disagree. The 10-year Treasury is looking to trade between 4.48% and 4.62% this week.

Further, with at least one and likely two and possibly three and an outside chance of four more Fed Reserve tightenings, the curve is likely to invert further:

"Market participants are having an easier time swallowing the idea that short-term rates are likely to remain higher for a while than longer-term ones. Some participants have said they expect this aberration, known as a yield-curve inversion, to last for the rest of the year.

Late Friday, the two-year Treasury was yielding about 0.12 percentage point more than the 10-year Treasury and 0.15 percentage point more than the 30-year Treasury.

The Treasurys team at Jefferies & Co. in New York said further inversion of the yield curve is basically a given.

That is because government sales of $22 billion of two-year Treasurys tomorrow and $14 billion of five-year Treasurys Thursday will likely add pressure to those maturities and send their yields higher. Month-end buying by longer-term investors who need to match their portfolios to extensions in benchmark indexes will likely support 10- and 30-year maturities and send those yields lower."


Source:

Treasurys May Remain Steady As Yield-Curve Inversion Persists
SHAYNA STOYKO
WSJ, February 20, 2006; Page C10
http://online.wsj.com/article/SB114040272292478175.html

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