US government bond yields were mostly lower on Wednesday morning, with investors keeping an eye on bond spreads after 5-year and 30-year interest rates turned up earlier this week.
The yield on 5-year treasury bonds fell by about 2 basis points to 2.47% at 11:00 ET, while the interest rate on 30-year treasury bonds was lower by more than 3 basis points at 2.487%. The yield on the reference 10-year government securities fell by more than 3 basis points to 2.365%. Yields are moving back in price and 1 basis point is equal to 0.01%.
Yields on 5-year government bonds rose above those on 30-year US government bonds on Monday for the first time since 2006, but that inversion faded on Tuesday.
Inversions in the yield curve have historically occurred before recessions, although the spread between the 2-year and 10-year spreads is considered more important than traders. That spread was virtually flat on Tuesday, according to CNBC, while other sources showed that the curve was reversed for a short time.
Antoine Bouvet, a senior interest strategist at ING, told CNBC’s Squawk Box Europe on Wednesday that he did not think the movements in the yield curve showed that “a recession is inevitable, fortunately.”
“But there’s obviously a risk, and that risk increases when you consider that the Fed is almost committed to raising interest rates to a restrictive area, at a time when some quarters of the economy are showing signs of slowing down, and obviously that’s something I need to be [on] the minds of investors, “he said.
On Wednesday morning, the yield on 2-year government bonds fell along with the 10-year bond, creating a spread of approximately 2 basis points.
Several solid economic indications were observed on Wednesday. Payroll company ADP said 455,000 jobs were added in March. Economists surveyed by Refinitiv have identified 450,000 new jobs.
“After all, at the moment the labor market is still solidly hired and demand is still ahead of supply. I say ‘right now’ because labor market statistics are always lagging behind and only follow changes in economic activity. And if the largest component of US Growth, which is a consumer, begins to distort under the high inflation they are experiencing, then that will ultimately affect employment, “said Peter Bukvar, chief investment officer, in a note. at the Bleakley Advisory Group.
The last fourth quarter of GDP growth was 6.9%, below the previous 7%.
Investors also kept an eye on the conflict in Europe. The war between Russia and Ukraine is leading to rising inflation, which investors fear may affect economic growth.
Moods rose on Tuesday after talks between Russia and Ukraine in Turkey, in which Russia’s deputy defense minister said Moscow had decided to “drastically” reduce its military activity near the Ukrainian capital.
Russia has begun moving some of its troops from Kyiv to other parts of Ukraine, but Pentagon spokesman John Kirby warned on Tuesday that the move was not a retreat.
– Jesse Pound and CNBC’s Holly Elliott contributed to this market report.