Curve Flattens Again in Data-Free Session

2s10s spread hits 20-year low. In sharp contrast to Friday’s pricing action, swap rates and Treasury yields declined during an orderly and quiet session that didn’t see much in the way of data or Fed speakers. Instead, the price action was largely driven by other markets, a risk-off move in equities perhaps fueling the rally in haven assets like Treasurys. The decline in rates flattened the curve significantly, pulling the spread between 2-year and 10-year Treasury  yields to –0.45%

China-Taiwan tensions rise as geopolitical tensions come back into focus. China extended its military drills around Taiwan, well past when those drills were expected to be completed. The Chinese military came closer than ever to Taiwan during those drills, which promises to keep markets on edge for as long as they continue. Japanese bond yields have declined significantly from recent highs as a result, the 10-year bond yield sitting at 0.162%.

CPI print due Wednesday. The last two CPI prints have proven to be remarkable market-moving events, and this one should be no exception. Forecasts call for the headline figure to decelerate from a 9.1% level to 8.7% while core CPI is also expected to fall.