April’s Monthly Review – Yields Hit Post-Election Lows on Elevated Geopolitical Tensions, Fiscal Reform Uncertainties
May 8, 2017
The Treasury curve flattened in April as prospects for additional Fed hikes kept the 2-year yield locked in but other factors weighed on longer yields. Military action in Syria and Afghanistan and discordant discourse between the U.S. and North Korea created a backdrop of uneasiness. At the same time, questions about the timing and structure of U.S. tax reforms applied downward pressure on yields. Conversely, the first round of the French election buoyed yields as the pro-EU candidate Macron made it through to the second round with a comfortable lead over the anti-EU Le Pen. The net effect of an anchored 2-year yield and longer yields hitting post-election lows was the curve hitting its flattest point (1.00% on April 18) between 2s and 10s since before the U.S. election. The Dollar also reflected disappointment in April by touching its weakest level since the election. Nonetheless, stocks managed monthly gains as quarterly corporate earnings were strong. Crude prices fell 2.5% on concerns of higher U.S. production. Click here to view April’s Monthly Review.