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The past week proved challenging for U.S. Treasury bonds, which experienced a decline of -1.4% due to progress made in debt ceiling talks. The 2-year U.S. Treasury yield saw a significant increase of nearly 30bps, marking its largest weekly rise since June 2022.
US Treasury yields increased slightly during the week, as progress in the U.S. Consumer Price Index (CPI) and worsening initial claims were not enough to offset the highest level (3.2%) in the University of Michigan's long-term inflation survey since 2011.
In the US, Treasuries erased almost all of their weekly gains on Friday after the release of strong economic data (employment and wages).
In the US, the dichotomy between what the market expects, a further hike (25 basis points) and then the end of the Fed's tightening cycle, and what the Fed continues to send out as a message, that rates will have to remain high for an extended period of time, will continue to drive the markets this week.
The traditional debt ceiling issue seems to be of greater concern this time around than in previous episodes, as the 1-year U.S. CDS exceeded 100 bps for the first time, while the difference between 1-month and 3-month Treasury yields reached nearly 2%.
The sharp rise in global rates had a negative impact on the performance of credit indices
Mixed signals on US employment data pushed yields lower!
A solid month for the fixed income asset class!
What if the Federal Reserve raised its funds rates for the last time this cycle?
The UBS/Credit Suisse agreement will have a material impact on the entire AT1 market!
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