Yields on U.S. Treasuries exhibited a flatter, more twisted curve on Friday, with short-dated bonds underperforming. A sharp rise in oil prices drove the yield on the 2-year Treasury note significantly higher during the U.S. trading session.
Yields on medium and long-term bonds declined for the day, leading to a narrowing of the 2s10s and 5s30s spreads. The surge in crude oil futures was fueled by market concerns over the potential for a full-scale war between the U.S. and Iran, which could threaten shipping through the Strait of Hormuz.
Shortly after 3 p.m. New York time, yields on short-term bonds had risen by approximately 3 basis points, while long-term bond yields had fallen by 1 to 2 basis points. This pushed the 2s10s and 5s30s spreads to narrow by 4 basis points and 2 basis points for the day, respectively.
The yield on the benchmark 10-year U.S. Treasury note settled near its daily low, around 4.545%, marking a decline of 1 basis point for the session.
WTI crude oil futures finished just below the day's peak in late trading but were still up roughly 4% from Thursday's close. An earlier report from Axios indicated the U.S. was deploying dozens of additional aerial refueling tankers to Israel, fueling expectations of an escalation in conflict in the near term.
The rise in oil prices triggered a sell-off in Treasuries, erasing gains prompted by bond buying during the Asian session. That earlier buying had been driven by a sell-off in technology stocks due to valuation concerns related to artificial intelligence.
As of 3 p.m. New York time, trading volume in Treasury futures was approximately 90% of the 20-day average, while volume in SOFR futures ranged between 70% and 90% of average levels.
As of 4:31 p.m. Eastern Time, key yields and spreads were as follows:
The 2-year Treasury yield was 4.183%.
The 5-year Treasury yield was 4.282%.
The 10-year Treasury yield was 4.5515%.
The 30-year Treasury yield was 5.0731%.
The yield spread between 2-year and 10-year notes was 36.63 basis points.
The yield spread between 5-year and 30-year bonds was 78.93 basis points.
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