Tuesday, May 19, 2015

Treasury Curve Flattens with Selling Emerging in Front End

Two year Treasuries were sold 5000 times in block at 109-205 at 11.35 (CST) as the front end of the curve trades heavy despite some recovery in the long end following the heavy selling across the curve after the stronger than expected housing data earlier this morning.  The Treasury 5-30 yield curve has flattened by 3 bps today as the front end is weaker, possibly on growing expectations that the Fed comes with rate hikes even before the December FOMC meeting.  

Note that the Fed releases the Minutes from the April FOMC meeting tomorrow.  Fed Williams of San Fran, Dudley of NY and Fed Chair Yellen have been more suggestive of forthcoming rate hikes, or at least guilty of excessive advising that 'every meeting is live', given the generally modest growth seen in recent economic  reports. 

One is tempted to wonder if there should be something within the Minutes released tomorrow which will mover forward the pricing for the Fed 'lift-off'.  

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