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July 03, 2018 at 01:16 PM
Treasury building in Washington.
The Treasury yield curve from 5 to 30 years flattened Thursday to the lowest level since August 2007, as a combination of weaker-than-expected U.S. inflation and solid demand for a record bond auction bolstered investor confidence in owning long-dated securities.
The spread narrowed by more than 4 basis points, the most since February, dropping through a previous intraday low from April to 27.7 basis points. The gap between 2- and 10-year Treasuries also shrank in a bull flattening move.
U.S. inflation took a breather in April from its acceleration in recent months, with the core consumer price index up by a weaker-than-anticipated 0.1 percent from March and just 2.1 percent on an annual basis. Perhaps in part because of the data, the Treasury saw good demand for its $17 billion auction of 30-year bonds, the largest-ever sale of the maturity.
“Bull flattening of the yield curve signals that inflation is not a problem,” Scott Minerd, chief investment officer at Guggenheim Partners, said Thursday on Twitter. “But that won’t stop the Fed from staying on course for three more rate hikes this year.”
