U.S. Treasury yields exhibited mixed movements, with short-term bonds outperforming while long-term bonds experienced sell-offs, leading to a steepening yield curve. The 2s10s yield spread widened by up to 10 basis points. Despite the release of GDP and initial jobless claims data, the market showed little reaction, as traders continued to digest the possibility of the Federal Reserve ending its easing cycle sooner than expected.
The auction of $22 billion in 5-year Treasury Inflation-Protected Securities (TIPS) was weak, with the yield coming in several basis points higher than pre-auction levels. The 2-year Treasury yield fell by about 4 basis points, while yields on 5-year and longer-term Treasuries rose by 2.5 to 6.5 basis points. The 2s10s and 5s30s yield spreads widened by 10 and 4 basis points, respectively.
In the swaps market, the implied Fed rate cut by the end of next year was approximately 35 basis points.
