Bond Market Update

Recovery

• Treasury yields have come in sharply from their morning highs. The shock of the Moody's downgrade appears to have worn off, perhaps on greater recognition that it should not be treated as such a "surprise," given that Standard & Poor's and Fitch Ratings had already downgraded the U.S. credit rating in years past.
• Short-covering activity is likely helping the rebound effort along with a dour Leading Indicators Report for April.
• The April Leading Indicators Report showed a 1.0% decline (Briefing.com consensus -0.7%) following a downwardly revised 0.8% decline (from -0.7%) in March. The report stipulated that the six-month growth rate for the LEI fell deeper into negative territory, but not enough to trigger a recession signal.
• Yield check:
  • 2-yr: unch at 3.98%
  • 3-yr: unch at 3.96%
  • 5-yr: +3 bps to 4.09%
  • 10-yr: +6 bps to 4.50%
  • 30-yr: +7 bps to 4.97%