US Bond Market: Safe-Haven Flows and UK Gilts Rally Boost Treasuries, Swap Spreads Widen

US Treasuries advanced on Wednesday, bolstered by a rally in UK government bonds during the early US session and an uptick in safe-haven demand. Bonds outperformed swap contracts after comments from Federal Reserve Governor Stephen Milan regarding the Trump administration's deregulatory agenda pushed long-end spreads to multi-year highs. Following 3 pm New York time, the yield curve flattened, with yields across maturities falling 2 to 4 basis points, and the 2s10s spread narrowing by approximately 2 basis points. The 10-year yield dropped 3.5 basis points to around 4.14%, while the equivalent UK gilt yield fell about 2 basis points more than its US counterpart. During the early US trading session, a decline in US equities provided support for Treasuries, as funds rotated out of high-value technology stocks, causing the Nasdaq to underperform. Safe-haven sentiment also underpinned US government debt, with investors anticipating a US response to instability in Iran, which pushed oil prices higher and drove gold to a record peak. As the rally in UK gilts extended through the London close, the gains in US Treasuries broadened. The UK bond surge stemmed from a deteriorating British economic growth outlook and robust demand for a £4.5 billion gilt auction maturing in 2035. Stimulated by Milan's comments on regulatory easing, long-end swap spreads reached their widest levels since early 2023. Corporate hedging flows also impacted the market. A total of seven issuers collectively sold $12.65 billion in the US investment-grade primary bond market, including a three-part JPMorgan Chase transaction worth $6 billion. As of 4:52 PM ET, the US 2-year Treasury yield fell 1.86 basis points to 3.5139%; The US 5-year Treasury yield fell 3.49 basis points to 3.7169%; The US 10-year Treasury yield fell 4.32 basis points to 4.136%; The US 30-year Treasury yield fell 4.66 basis points to 4.7889%; The US 2-year/10-year Treasury yield spread narrowed by 2.26 basis points to 62.002 basis points; The US 5-year/30-year Treasury yield spread narrowed by 1.18 basis points to 107.018 basis points.