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2026-05-28 21:56:11
[Data Drives US Treasuries to Rebound and Turn Positive; Core PCE Rise of 3.3% YoY Continues to Suppress Yield Compression] ⑴ US Treasuries fell in early trading on Thursday due to the second US strike on Iran, but short covering subsequently pushed prices back up from their lows. Core PCE rose 0.2% month-on-month, lower than the expected 0.3%. Q1 GDP was revised down to 1.6%, personal income was flat, and durable goods orders jumped 7.9%, but details were mixed. ⑵ US Treasuries rebounded after the data release, with short covering dominating the market, and month-end index-linked buying also participating. The 2-year yield was 4.043%, the 10-year yield was 4.483%, and the 30-year yield was 5.006%. The 2s-10s spread narrowed to 43.97 basis points, and the 2s-30s spread narrowed to 96.30 basis points. ⑶ The core PCE YoY of 3.3% is still far above the Fed's 2% target, and today's data will not shake the Fed's stance. However, incomes failed to keep pace with inflation, forcing a slowdown in consumption. Traders perceived an impending economic slowdown, prompting short covering. The price rally stalled, the curve compression pattern remained intact, and traders took positions in the belly area in preparation for the issuance of $44 billion in 7-year Treasury bonds.
