Updated 4:00am ET August 12, 2019
The slope of the Treasury yield curve flattened for the fourth week in a row. The 2s10s spread tightened by five basis points to a fresh cycle low of 10 bps while the 2s30s spread tightened by six basis points to 62 bps. The spread between the 3-month bill yield and the 10-yr note yield contracted by seven basis points, ending the week at -26 bps. The flattening took place as longer tenors continued rallying amid persistent concerns about global growth.
Corporate spreads widened once again with the high yield spread leading the way. The high yield spread widened by 20 bps to 481 bps while the investment grade spread widened by five basis points to 104 bps. The high yield spread is now back at its high from June with the January high looming 60 bps above.
The yield spread between Germany's 10-yr bund and the U.S. Treasury 10-yr note narrowed by three basis points to -234 bps.
The 5y5y forward rate ticked higher by a basis point to 1.88% after dipping to 1.81% at the start of the week.
The fed funds futures remains hungry for more cuts, pricing in a 100.0% implied likelihood of a 25-bps cut in September and a 16.5% implied likelihood of a 50-bps cut. The fed funds futures market expects that a September cut will be followed by another cut in October (79.0%) while the implied likelihood of a fourth cut in December is currently at 49.7%.