US Treasurys have been getting destroyed since it became clear Donald Trump would become the 45th president of the United States. Heavy selling ran yields at the long end of the curve up about 50 basis points off of their election night lows as traders began to price in the potential return of inflation as a result of Trump’s plan to cut taxes and rebuild US infrastructure. However, after screaming higher overnight and ahead of the US session, yields are showing signs of a reversal.
Early Monday, the 2-year yield ticked above 1.00% for the first time since January. And at the long end, the 30-year crossed the 3.00% threshold for the first time December 2015. The early morning carnage had yields across the complex looking at double-digit gains. But the selling climaxed around 6 a.m., when traders began settling into their desks for the start of the US session, and hasn’t resurfaced.
Instead, short covering has flooded the market with buy orders as traders look to book some profits from the move. Here’s a look at the scoreboard as of 12:47 p.m. ET:
- 2-year +5.1 bps at 96.6 bps 3-year +6.1 bps at 1.23% 5-year +6.3 bps at 1.62% 7-year +5.6 bps at 1.98% 10-year +4.6 bps at 2.20% 30-year +2.1 bps at 2.96%
Monday’s short covering has caused the yield curve to flatten. After topping out at 205 bps earlier this morning, the spread between the 2-year yield and the 30-year yield has tightened to 199 bps. That was more than 60 bps wider than where it was in August, and about 30 bps above where it was on election night.