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Long-End of US Yield Curve Is Flattening, Short-End Steepening

Saturday, February 18, 2017 6:27
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From Eric Bush: The spread between 30-year US treasuries and 10-year US treasuries has fallen to just 60 bps, which is the smallest spread in about 2 years.

The spread between 30-year bonds and 7-year bonds is down to 79 basis points, again basically at 2-year lows. What is interesting is that the spread between 10-year and 3-month bonds is well off the lows made in 2016. On 7/8/16, this spread was just 108 basis points. Today, it stands at 193 basis points. So since last summer the long-end of the yield curve has flattened by about 25 basis points while the front end of the yield curve has steepened 85 basis points.

Editor’s note: What this development will mean for bond yields — and bond ETFs — as we push toward the next Federal Reserve meeting in March remains to be seen. So far, bonds have held up remarkably well, despite Fed chairwoman Janet Yellen’s recent warnings about multiple rate hikes coming this year.

The iShares Barclays 20+ Yr Treas.Bond ETF (NASDAQ:TLT) closed at $120.32 on Friday, up $0.71 (+0.59%). Year-to-date, TLT has gained 1.00%, versus a 5.17% rise in the benchmark S&P 500 index during the same period.

TLT currently has an ETF Daily News SMART Grade of C (Neutral), and is ranked #20 of 27 ETFs in the Government Bonds ETFs category.

This article is brought to you courtesy of Gavekal Capital.

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