Treasury Yield Curve Analysis

The 30-year Treasury yield finished at 4.64 Friday, marking a decline of 8 basis points from last Friday's 4.72. The long end of the curve saw the steepest drops this week, with the 20-year sliding from 4.66 to 4.57, while the 10-year moved down to 3.97 from 4.08. The shorter end held steadier, as the 2-year settled at 3.38 after trading at 3.48 a week ago. Overall, rates across the curve moved lower, with the most dramatic shifts concentrated in the longer maturities.

The yield curve shows a clear inversion between the 3-month rate of 3.67 and the 10-year at 3.97. Moving out along the curve, the 2-year sits at 3.38, with the 3-year just slightly higher at 3.39. From there, rates climb gradually through the 5-year at 3.51 and the 7-year at 3.72, before jumping more noticeably to 3.97 at the 10-year maturity. The 20-year stands at 4.57 and the 30-year reaches 4.64, showing modest spacing in the very long end.

Looking back over the past month, all rates have shifted lower, with the decline of 27 basis points at the 10-year representing the biggest move on the curve. The 20-year dropped 22 basis points while the 30-year fell 19 basis points, and even the short end moved down, with the 2-year declining 21 basis points from its reading one month prior. The shortest maturities barely budged, as the 3-month and 6-month stayed flat at 3.67 and 3.60 respectively, while the 1-year actually ticked higher to 3.48 from 3.55.

The curve has flattened considerably since last week, with long-end rates dropping faster than short-end rates. The gap between the 2-year and 10-year narrowed slightly, standing at 59 basis points compared to 60 basis points last Friday. The 3-month to 10-year spread widened marginally to 30 basis points from 39 basis points last week. Compared to one month ago, the 3-month to 10-year spread sits at 30 basis points versus 57 basis points a month prior, a substantial compression indicating the curve has become significantly flatter over that longer period.