Treasury Yield Curve Analysis

The 30-year Treasury yield fell to 4.99 percent on Friday, down from 5.07 percent a week ago. This marks the first time the long bond has dipped below 5 percent in recent trading sessions. The yield has declined eight basis points over the past week, providing some relief after climbing above 5 percent last Friday. Investors watched the long end closely as the auction calendar remained light heading into the holiday weekend.

Rates across the maturity spectrum moved lower compared to last week, with medium-term yields showing the biggest declines. The 2-year fell to 3.98 percent from 4.13 percent a week ago, while the 5-year dropped to 4.13 percent from 4.27 percent. The 10-year yield declined to 4.45 percent from 4.56 percent last Friday. Short-term rates held steadier, with the 3-month rate at 3.69 percent, little changed from 3.68 percent a week ago. The 1-year rate fell to 3.79 percent from 3.86 percent last week.

Looking back one month, the curve has shifted significantly higher and grown steeper. The 2-year yield has climbed to 3.98 percent from 3.71 percent in mid-April, a gain of 27 basis points over four weeks. The 10-year rate rose to 4.45 percent from 4.26 percent, up 19 basis points over the same span. The 5-year saw one of the largest monthly increases, rising to 4.13 percent from 3.84 percent a month ago. The 30-year has moved to 4.99 percent from 4.88 percent, while shorter maturities like the 3-month have held relatively flat at 3.69 percent compared to 3.70 percent a month ago.

The curve today remains upward sloping but shows some inversion at the front end. The 3-month rate at 3.69 percent sits slightly below the 6-month rate at 3.78 percent. The curve steepened compared to last week as longer maturities fell faster than shorter ones. The spread between the 2-year and 30-year has widened to about one percentage point from roughly 0.94 percentage points a week ago. Comparing to one month ago, the entire curve has shifted higher and the middle portion has steepened noticeably, with the gap between 3-year and 7-year yields now wider than it was in mid-April.