2018.04.1821:46:00UTC+00U.S. Yield Curve Remains in Focus as Treasury Yields Rally

Treasury yields across the board rallied and the closely monitored tightening of the spread between the yield of short-dated and longer-dated bonds saw a respite.

The two-year Treasury note yield, the most reactive to changes in interest-rate expectations, advanced 4.4 basis points to 2.429 percent, the highest since August 2008, marking the biggest one-day rally since February 14. The benchmark 10-year Treasury note yield edged up 5.3 basis points to 2.867 percent, the biggest one-day yield increase since February 14.

The spread between the two-year note yield and the 10-year note yield, a widely tracked measure of the yield curve, slightly widened to 43.8 percentage points.

The 30-year bond yield edged up 4.9 basis points to 3.025 percent, ending a three-session yield decline, to record its biggest one-day yield rally since February 21.

Up to now, the yield curve has been flattening over worries that a boost to financial policy via tax cuts and an increase to spending as the U.S. economy closes in on the ninth year of its expansion. However, the speed at which this flattening has occurred has surprised traders, with some taking the move to sell their holdings to profit from the run-up in long-dated bond prices.

The curve is often tracked as a measure of investor sentiment regarding the economy's overall health. In a normal scenario, the yield curve steepens as investors have a tendency to demand a higher yield for lending further into the future, while a flattening curve is seen as an indication investors are concerned about the longer term outlook. An inverted curve, where a shorter-dated yield surpasses the yield on the longer-dated debt, stokes fears of a recession.