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2026-04-06 20:50:34
[US Treasury yield curve bear flattens, swap spreads widen slightly, market oscillates between ceasefire hopes and Trump's ultimatum] ⑴ Swap spreads widened slightly at the open on Monday, except for the 2-year spread. Swaps lag behind the bear flattening of the yield curve. US Treasuries rebounded slightly from their Tokyo session lows due to hopes for a US-Iran ceasefire, then trended lower, showing some directional payment flows. ⑵ The pre-earnings season quiet period may limit investment-grade bond issuance, but large banks and financial companies will begin releasing their Q1 earnings and subsequently issuing bonds starting April 13th. These borrowers tend to hedge through swaps, and transaction-related swap flows may favor the receiving side. ⑶ SOFR futures opened mixed and then fell along with front-end spot prices. With most markets in London and continental Europe closed on Easter Monday, US Treasury trading was limited to the Tokyo session. Yields opened mixed, and as US trading began, the yield curve flattened slightly. (4) During the Tokyo session, US Treasuries continued their decline following Friday's strong non-farm payrolls data. A pre-sale steepening of the JGB yield curve ahead of Japan's 30-year government bond issuance also triggered spillover selling. Rising oil prices, a weaker yen, and concerns about fiscal expansion pushed the 10-year JGB yield to its highest level since 1999. During the US session, Treasuries rebounded from their lows due to reports of a 45-day ceasefire negotiation, but market tensions remained as Trump began the countdown to attacks on Iranian civilian infrastructure. (5) Traders seized the opportunity of the rebound to hedge against this week's $119 billion in Treasury supply, pushing the yield curve higher and flattening across the board. The 2-year yield rose 1.9 basis points to 3.871%, and the 10-year yield rose 1.4 basis points to 4.360%, narrowing the 2-year/10-year spread to 48.94 basis points. US stock index futures rose, the dollar held steady, and crude oil and gold fell due to ceasefire reports.
