The 7 year note auction was pretty bad. I gave it a grade of F. Rick Santelli on CNBC was generous and gave it a D-. Either way the auction was not all that hot.
However, after a brief tick higher in yields, buyers came back in and yields started to move back to the downside.
A look at the yield curve currently shows:
- 2 year yield 4.518%, unchanged
- 5 year yield 3.939%, -3.8 basis points
- 7 year yield 3.877% -5.2 basis points
- 10 year yield 3.755%, -7.1 basis points
- 30 year yield 3.829%, -7.7 basis points
The further inversion of the yield curve now has the 2-10 year spread at a new low inversion going back to 1988 at -75.9 basis points. This is saying the market is thinking the Fed will tighten into a recession that will lead to the Fed reversing course on policy as well. .
2-10 year spread continues to invert
Fed commentary this week has the Fed continuing to raise rates into 2023 with a terminal rate near 5%, but it could also be higher.