Curve Flattens as COVID-19 Wave Emerges in China

Curve flattens as 2s10s spread approaches inversion. Treasury yields and swap rates rotated around the 7-year point of the curve, inverting the spread between 5-year and 30-year rates for the first time since 2006, while 2s10s (an oft-cited predictor of recession) narrowed to 10 basis points. 2-year Treasury yields would ultimately end the day 6bps higher while 10-year yields fell a little bit more than a basis point.

COVID-19 outbreak in China continues to worsen. Shanghai became the latest city to shut down as authorities look to contain a worsening outbreak. For now, the outbreak has had a limited impact on global asset prices, though it may be somewhat responsible for a decline in crude oil prices today. US crude fell 7% on the day, closing at $105/barrel- though it still sits nearly 41% higher since the start of the year.

Ukraine-Russia negotiations continue. Russia has reportedly dropped some of its asks in recent talks and is prepared to let the Ukraine join the EU if it remains independent from alliances like NATO as a part of ceasefire negotiations. Talks will continue tomorrow in Turkey as Ukraine aims to end the month-long invasion.