Updated 5:00am ET December 9, 2019
U.S. Treasury yield spreads widened notably during the past week. The 2s10s spread expanded by six basis point to 23 bps while the 2s30s spread widened by eight basis points to 68 bps. For its part, the spread between the 3-month bill yield and the 10-yr note yield widened by 13 basis points to 32 bps.
Corporate spreads narrowed for the second week in a row. The investment grade spread narrowed by three basis points to 90 bps, hitting a fresh low for the year. Meanwhile, the high yield spread narrowed by eleven basis points to 448 bps. The high yield spread is now just eight basis points above its low from September.
The yield spread between Germany's 10-yr bund and the U.S. Treasury 10-yr note ticked up by a basis point to -214 bps.
The 5y5y forward rate jumped seven basis points to 1.79%. The inflation gauge is now 15 bps above this year's low, hovering near its high from November. The recent movement comes shortly after Financial Times reported that the Fed may allow inflation measures to exceed 2.0%.
Expectations for a rate cut during the first half of 2020 remain low, but expectations for a cut during the second half inched up during the past week. The fed funds futures market now sees a 54.7% implied likelihood of a rate cut in September while the implied probability of a rate cut in November has increased to 55.8% from 54.2% one week ago.