U.S. Bond Market: Government Bonds Rise, Reversing the Decline After Trump's Nationwide Speech

U.S. Treasury yields rose during the U.S. session, recouping the losses from the Asian trading session and the early London morning. Earlier, following President Trump’s nationwide address on Wednesday evening, Treasury yields briefly moved higher. The upward trend in Treasuries continued throughout the U.S. trading session. Iran is reported to be drafting an agreement with Oman to monitor navigation through the Strait of Hormuz, a development that led to a widening of swap spreads.

Just after 3:00 p.m. New York time, U.S. Treasury yields were near their intraday lows; yields across the curve fell by 1 to 2 basis points, reversing the earlier rise. The yield on the 10-year U.S. Treasury was around 4.30%, down 1.5 basis points on the day, performing better than German and U.K. Treasuries.

Despite a sharp rise in oil prices, with front-month WTI crude oil futures up 11% at the end of trading, U.S. Treasuries still moved higher. U.S. equities fell, suggesting that the market is more focused on the impact of rising oil prices on economic growth than on near-term inflation concerns, providing support for U.S. debt.

Swap spreads widened across the board, even though they had come off their intraday highs.

As of 3:47 p.m. New York time, the yield on the 2-year Treasury was 3.7942%;

the yield on the 5-year Treasury was 3.9428%;

the yield on the 10-year Treasury was 4.3049%;

the yield on the 30-year Treasury was 4.8826%;

the spread between the 5-year and 30-year Treasuries was 93.8 basis points;

the spread between the 2-year and 10-year Treasuries was 50.86 basis points.

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