Treasury yields invert as investors look ahead to Fed minutes

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U.S. Treasury yields inverted on Monday morning, with investors remaining focused on Federal Reserve policy, ahead of the central bank’s latest meeting minutes due out later in the week.

The yield on the 2-year Treasury yield was up less than basis point to 2.4384 at 4:25 a.m. ET, while the benchmark 10-year Treasury note rose 1 basis point to 2.386%. The yield on the 5-year government bond moved less than a basis point higher to 2.5553% and the 30-year Treasury bond climbed 2 basis points higher to 2.4499%. Yields move inversely to prices and 1 basis point is equal to 0.01%.

Treasurys

2-year and 10-year yields, which form the main part of the yield curve watched by traders, inverted once again on Monday. Those Treasury yields flipped on Thursday for the first time since 2019 and did so again on Friday, following the release of closely watched jobs data.

The Bureau of Labor Statistics reported on Friday that 431,000 nonfarm payrolls were added in March, with an unemployment rate of 3.6%. Economists surveyed by Dow Jones had forecast that 490,000 jobs were added last month, with an unemployment rate of 3.7%.

The inversion in yields following this report points to investor concern that strong economic data could give the Fed the green light to go ahead with plans to more aggressively hike interest rates. There are fears that these rate hikes could slow economic growth.

5-year and 30-year Treasury yields have also remained inverted, having flipped for the first time since 2006 a week ago.

The inversion in Treasury yields has historically occurred prior to recessions, though economists have pointed out that it is not a guarantee of an economic downturn.

Investor focus this week will be on minutes from the latest Fed meeting, due out at 2 p.m. ET on Wednesday.

ING strategists said in a note on Monday that they expected the Fed to announce 50 basis point rate hikes at the May, June and July meetings.

“This should continue to push yields up across the board, but also invert the curve further,” they said.

On Monday, February’s factory orders data is set to be released at 10 a.m. ET.

Investors also continue to watch developments in Russia-Ukraine war. Russia’s chief negotiator Vladimir Medinsky said draft peace treaty talks will resume on Monday, underlining that the Kremlin’s position on Crimea and Donbas remains unchanged.

Ukrainian President Volodymyr Zelenskyy has accused Russian forces of committing genocide, saying Ukrainian people were being “destroyed and exterminated.”

Auctions are scheduled to be held on Monday for $57 billion of 13-week bills and $48 billion of 26-week bills.

CNBC’s Jesse Pound and Sam Meredith contributed to this market report.

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