Market sentiment remained cautious as stocks declined while Treasuries strengthened, with heightened activity in the bond market attributed to month-end duration extensions and economic anxieties. The yield on the benchmark 10-year Treasury fell to its lowest level since December, reflecting investor concern about the U.S. economy, exacerbated by recent weaker-than-expected economic indicators. The tightening of swap spreads points toward anticipated increases in European Bund issuance to fund potential defense spending, as the market prepares for changes in Treasury issuance trends.
The rally across the Treasury curve yesterday was the sole significant story, as investors showed hesitancy ahead of Nvidia’s earnings announcement.
The benchmark 10-year yield fell to its lowest since mid-December amidst a bull flattening of the curve, sparking outsized buying flows.
Market uncertainty regarding the economy was heightened by poor consumer confidence data and lackluster corporate earnings forecasts.
A notable tightening of swap spreads indicates market anticipation for increased Bund issuance tied to potential €200bln defense spending.
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