2s10s Inverts Most Since 2000

Curve inverts dramatically as 2-year Treasury yield hits 15-year high. Swap rates and Treasury yields were mixed across a flattening curve today, the 2-year note increasing by ~8 bps to 4.2% and the 10-year note decreasing ~3 bps to 3.69%. The 2s10s inversion in Treasury yields reached a level that had not been seen since 2000, falling to -53 bps. Meanwhile, markets have already ratcheted up expectations for the Fed’s November rate hike, Fed Funds futures pricing in a ~80%+ likelihood of another 75 bp hike.

Japan announces currency intervention for the first time in decades. Japan’s Ministry of Finance, which manages the country’s currency policy, today announced intervention to strengthen the Yen by buying it on the open market. To continue doing this over a longer horizon, Japan may need to sell dollar assets such as US Treasuries in order to continue to purchase their currency. The Japanese Yen fell to its weakest level in over 30 years.

Week ahead. There will be public comments made by Fed officials every day next week, where all speeches will be closely parsed for hints around future rate hikes. There will also be several data releases, including August durable goods orders, personal spending, and personal income levels.