US Treasury yields were mostly higher Wednesday morning, with investors watching spreads between bonds after 5-year and 30-year interest rates flipped earlier in the week.
The 5-year Treasury yield rose less than a basis point to 2.493% at 7:00 am ET, while the 30-year Treasury yield rose 1 basis point to 2.533%. The yield on the benchmark 10-year Treasury rose nearly 2 basis points to 2.416%. Yields move inversely with prices and 1 basis point equals 0.01%.
Yields on the 5-year Treasury bond rose above the 30-year Treasury bond on Monday for the first time since 2006, but that reversal faded on Tuesday.
Yield curve inversions have historically occurred before recessions, although it is the spread between 2 and 10 years that is considered more important by traders. That spread practically flattened Tuesday, according to CNBC data, while other sources showed the curve briefly inverted.
Antoine Bouvet, senior interest rates strategist at ING, told CNBC’s Squawk Box Europe on Wednesday that he didn’t think the movements in the yield curve suggested that “a recession is fortunately inevitable.”
“But there is clearly a risk, and that risk is increasing given the Fed’s commitment to raising rates near-restrictive territory at a time when some parts of the economy are showing signs of slowing, and that is clearly something that is necessary to be [on] the minds of investors,” he said.
On Wednesday morning, the 2-year Treasury yield was slightly lower while the 10-year was up, easing fears of an inversion.
The Russia-Ukraine war has added to already rising inflation, which investors say could weigh on economic growth.
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Sentiment was boosted on Tuesday after negotiations between Russian and Ukrainian officials in Turkey, during which Russia’s deputy defense minister claimed Moscow had decided to “drastically” limit its military activities near the Ukrainian capital.
Russia had begun moving some of its troops from the city of Kyiv to another location in Ukraine, but Pentagon press secretary John Kirby warned Tuesday that the moves will not amount to a withdrawal.
In addition to monitoring developments in this geopolitical crisis, updates on economic data also remain in the focus of investors.
Payroll services company ADP will release its March employment change report Wednesday at 8:15 am ET.
The final reading of US gross domestic product for the fourth quarter will be released at 8:30 am ET.
An auction for $30 billion in 119-day notes is set to take place on Wednesday.
— CNBC’s Jesse Pound and Holly Ellyatt contributed to this market report.