Bond Prices Further Trim Gains; Long End Drops Deeper into the Red

US Treasury prices continued to retrace Tuesday’s gains with the 2-year maintaining its lead while the long bond slipped to Thursday levels, further steepening the curve spread. The bid found on the back of the weak May ADP private payrolls headline lost its mojo as stocks worked the session highs.

The Beige Book release, prepared to advise the upcoming June 18 – 19 Federal Open Market Committee (FOMC) meeting, was a bit more optimistic than the prior report with the economy seen expanding at a “modest pace overall,” while “Almost all Districts reported some growth, and a few saw moderate gains.”

The 30-year yield was recently at the 2.638% new high against an early 2.599% low and 2.606% close Tuesday. The 10-year yield was just off the high near 2.129% from an early 2.08% low, recent 2.13% high and 2.121% close. The 5-year yield was near 1.862% versus an opening 1.805% low, midday 1.876% high and 1.883% Tuesday. The 2-year yield was near 1.847% from an early 1.775% low, 1.85% midday high and 1.874% close.

University of Oregon economics professor and Fed Watcher Tim Duy said in a report that, while many read Tuesday’s comments from Fed Chair Jerome Powell as signaling “an imminent rate cut. I do not think this is the case. The consensus view within the FOMC is still that a rate cut would be premature. Instead, the more likely message is that the Fed recognizes the issues currently of concern for market participants and they stand ready to adjust policy as necessary.

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