Bond Traders Weekly Outlook: US Treasury Yields Surge After Blowout Jobs Report

Friday was a day of reversal for all markets after the blowout jobs number. U.S. Treasury yields reversed sharply higher Friday, with two-year yields surging 19 bps. The data and yields that followed spurred a US dollar reversal, with the yen, Australian dollar, New Zealand dollar and South African rand all down around 2%. The euro was down 1.1% as it gained on the crosses. During the week we saw the BOE and ECB raise rates 50bps, the Fed and HKMA hike 50 bps and Brazil stay pat. With the conspicuous loosening of financial conditions, markets were prepared for a more hawkish leaning Powell press conference. Maybe we get that at his speech next week.

Hungry Bond Traders

There is a firm belief the Central Banks are blindly raising rates because ‘they have to’ and the consequences will be dire, furthermore that the US Administration is bumbling along with damaging decisions one after the other.

Weekly Recap

Ten-year Treasury yields traded down to an almost five-month low of 3.33% during Powell’s press conference. By Friday U.S. Treasuries were sharply lower note in response to the much stronger than expected Employment Situation report for January. Treasuries widened their post-NFP losses after the ISM Services Index for January (actual 55.2%; consensus 50.3%) returned into expansionary territory. Friday’s selling returned 10s and 30s to little changed for the week while shorter tenors turned negative for the week. The 2s10s spread tightened by seven basis points to -76 bps.


Disinflation was the new buzz word from the latest FOMC from Powell. Though of course that caused some trembles in the bond market Friday after the outlier jobs beat. Its a difficult one with the basis changes, seasonality and strikes how accurate that beat was. I can we won’t know until next month.

I will say that it is gratifying to see the disinflationary process now getting underway, and we continue to get strong labor market data.” “So, I would say it is a good thing that the disinflation that we have seen so far has not come at the expense of a weaker labor market. But I would also say that that disinflationary process that you now see underway is really at an early stage.”

Chair Powell FOMC Feb 2023

Yield Watch

  • 2-yr: +21 bps to 4.29% (+8 bps for the week)
  • 3-yr: +21 bps to 3.97% (+5 bps for the week)
  • 5-yr: +18 bps to 3.67% (+5 bps for the week)
  • 10-yr: +14 bps to 3.53% (+1 bp for the week)
  • 30-yr: +7 bps to 3.63% (UNCH for the week)
  • Investment-grade bond funds posted outflows of $582 million, and junk bond funds reported negative flows of $1.497 billion (from Lipper).
  • Total money market fund assets increased $2.1bn to $4.821 TN. Total money funds were up $194bn, or 4.2%, y-o-y.
  • Total Commercial Paper dropped $21.2bn to $1.290 TN. CP was up $267bn, or 26.1%, over the past year.

Key Rates and Spreads


  • 10-year Treasury bonds 3.52%, down -0.10 w/w (1-yr range: 1.66-4.25) (12 year high)
  • Credit spread 1.86%, down -.02 w/w (1-yr range:1.76-2.42)
  • BAA corporate bond index 5.28%, down -0.12 w/w (1-yr range: 3.59-6.59) (10 year+ high)
  • 30-Year conventional mortgage rate 6.19%, down -0.01% w/w (1-yr range: 3.67-7.38) (new 20 year high)

Yield Curve

  • 10-year minus 2-year: -0.77%, down -0.08% w/w (1-yr range: -0.85 – 1.59) (new 40 year low)
  • 10-year minus 3-month: -1.14%, up +0.02% w/w (1-yr range: -1.17 – 2.04) (new low)
  • 2-year minus Fed funds: -0.29%, down -0.18% w/w
10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity (T10Y2Y)

10 Year Note Technical Analysis via KnovaWave

Long Bond Yield

Highlights – Federal Reserve

  • Federal Reserve Credit fell $23.2bn last week to $8.423 TN.
  • Fed Credit was down $477bn from the June 22nd peak.
  • Over the past 177 weeks, Fed Credit expanded $4.697 TN, or 126%.
  • Fed Credit inflated $5.613 Trillion, or 200%, over the past 534 weeks.
  • Fed holdings for foreign owners of Treasury, Agency Debt last week gained $4.3bn to $3.325 TN.
  • “Custody holdings” were down $133bn, or 3.8%, y-o-y.

Markets price in a 4.90% expected (near) peak Fed funds rate at the May 3rd FOMC meeting, dismissing committee members’ calls for a 5% plus “terminal rate.” Markets discount a Fed pivot and the policy rate down to 4.47% by year end.

Highlights – Mortgage Market

  • Freddie Mac 30-year fixed mortgage rates declined three bps to 5.99% (up 244bps y-o-y).
  • Fifteen-year rates increased three bps to 5.18% (up 241bps).
  • Five-year hybrid ARM rates fell five bps to 5.42% (up 271bps).
  • Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates down 15 bps to 6.32% (up 257bps).
Mortgage News Daily November 4, 2022

Key Bond Auctions

Global Bond Watch

“Government bond prices around the world are moving in tandem, reducing investors’ ability to diversify their portfolios and raising concerns of being blindsided by market gyrations. Correlations between currency-adjusted returns on the government debt of countries such as the U.S., Japan, the U.K. and Germany are at their highest level in at least seven years, data from MSCI showed, as central banks around the world ramp up their fight against inflation.”

October 10 – Reuters (Davide Barbuscia)

Major Benchmark 10-year Bond markets

Bond Market Performance 2023

Major 10-year Bonds/Notes

Highlights – European Bonds

Ten-year government yields down significantly to start the year.

  • Greek 10-year yields sank 25 bps to 4.00% (down 57bps y-o-y).
  • Italian yields declined seven bps to 4.03% (down 67bps).
  • Spain’s 10-year yields fell 11 bps to 3.12% (down 40bps).
  • German bund yields declined five bps to 2.19% (down 25bps).
  • French yields fell six bps to 2.64% (down 34bps).
  • The French to German 10-year bond spread narrowed one to 45 bps.
  • U.K. 10-year gilt yields sank 25 bps to 3.06% (down 62bps).

Where we got to in 2022:

Highlights – Asian Bonds

  • Japanese 10-year “JGB” yields added a basis point to 0.50% (up 7bps y-t-d). 

Inflation Matters

Inflation with Henry Kaufman

Kaufman is the legendary chief economist and head of bond market research at Salomon Brothers is someone who knows Inflation.  Henry Kaufman in an interview with Bloomberg’s Erik Schatzker Jan 14, 2022:

 “I don’t think this Federal Reserve and this leadership has the stamina to act decisively. They’ll act incrementally. In order to turn the market around to a more non-inflationary attitude, you have to shock the market. You can’t raise interest rates bit-by-bit.”

“The longer the Fed takes to tackle a high rate of inflation, the more inflationary psychology is embedded in the private sector — and the more it will have to shock the system.”

“‘It’s dangerous to use the word transitory,’ Kaufman said. ‘The minute you say transitory, it means you’re willing to tolerate some inflation.’ That, he said, undermines the Fed’s role of maintaining economic and financial stability to achieve ‘reasonable non-inflationary growth.’”

The rubber is meeting the road as the trifecta of rising interest rates, the Russian invasion of Ukraine and surging costs continues to weigh, this has been no surprise to us here and shouldn’t have been to the market and PTB. You can only play with fire for so long before you get scorched!

With all the redirection of blame at the Fed about inflation one has to understand it is a global phenomenon outside the Fed’s Control. With the war drums louder than ever the supply chain issues are out of control. The Federal Reserve is not in control of global energy and commodities prices.

Everything points to powerful inflationary dynamics and a Federal Reserve so far “behind the curve.”

Instability is pronounced, credit defaults are on track to rise in North America, Europe, Asia, and Australia, according to a survey by the International Association of Credit Portfolio Managers. The economic slump is likely to occur later this year or in 2023, according to the survey.

Global Bonds 2022 Performance

10 Year Bonds – Americas 2022 Performance

10 Year Bonds – Europe 2022 Performance

10 Year Bonds – Asia 2022 Performance

10 Year Bonds – Africa 2022 Performance

-comment section below data-

Real Time Economic Calendar provided by

Subscribe and Follow

Find us at

Follow our contributors on Twitter @traderscom @thepitboss16 @knovawave @ClemsnideClem

Note these charts, opinions, news, estimates and times are subject to change and for indication only. Trade and invest at your own risk.

Trade Smart!