Treasury Yield Curve Analysis

The 30-year Treasury rate settled at 5.11 percent on Wednesday, pulling back from the 5.18 percent level seen Tuesday but holding above last week's close of 5.03 percent. This marks the third straight week the long bond has traded higher, with Wednesday's decline representing the first meaningful pullback in that span. The 20-year maturity also slipped to 5.10 percent from 5.19 percent yesterday while remaining above the 5.03 percent reading from a week ago. The fact that long-term rates are sitting higher than where they finished last week suggests continued upward pressure on the long end of the curve, even with Wednesday's modest retreat.

Looking across the full maturity spectrum, rates moved lower on Wednesday following Tuesday's broad-based increase. The 2-year yield fell to 4.04 percent from 4.13 percent, the 5-year slipped to 4.22 percent from 4.32 percent, and the 10-year dropped to 4.57 percent from 4.67 percent. Short-term bills saw similar moves, with the 3-month rate declining to 3.65 percent from 3.67 percent. Comparing to one week ago, the middle and longer portions of the curve have shifted higher, with the 7-year at 4.39 percent versus 4.28 percent and the 10-year at 4.57 percent versus 4.46 percent. The shorter maturities from 4 weeks out to 1 year have held relatively steady, trading close to or slightly above their levels from a week prior.

The curve has undergone a notable steepening over the past month as rates pushed higher across nearly every maturity. The 2-year jumped to 4.04 percent from 3.79 percent one month ago, while the 3-year climbed to 4.11 percent from 3.78 percent. The 5-year moved to 4.22 percent from 3.92 percent, and the 10-year rose to 4.57 percent from 4.29 percent. Long end rates have also increased substantially, with the 30-year at 5.11 percent compared to 4.89 percent four weeks earlier. The most pronounced monthly moves have occurred in the 3-year through 7-year section of the curve, where rates have risen by roughly 30 to 33 basis points over that span. The shortest maturities including the 4-week and 6-week bills have actually declined slightly over the month, moving in the opposite direction of everything beyond the 3-month maturity.

The yield curve has steepened considerably when measured from the shortest to longest maturities. The gap between the 30-year and 3-month rates stands at about 1.46 percentage points, wider than the 1.34 percentage point spread recorded a week ago. The 30-year to 2-year spread has also widened to roughly 1.07 percentage points from about 1.05 percentage points a month ago. Currently, the curve slopes upward from the short end around 3.65 percent through the middle section in the low 4 percent range up to the long end near 5.10 to 5.11 percent. This represents a more gradually sloping curve compared to the inversions that characterized the market in earlier periods, with all maturities now trading in a normal positive-slope configuration.