Economist's Insights

Today’s Trading Activity – The 2-Year Yield Keeps Climbing

Nov 13, 2017

U.S. equities dropped at the open but turned positive after just thirty minutes of trading. The Dow dropped 79 points in the first four minutes of the session but recovered and spent most of the day hovering just above break-even. The index ultimately gained 17 points, or 0.07%, on Monday. The S&P and Nasdaq followed similar paths to equally modest gains of 0.10%. Within the S&P, seven of 11 sectors and just under 57% of all companies within the index closed higher Monday. Utilities was the top performing sector. In the Treasury market, yields rose Monday and were led higher by the short-end of the curve. The 2-year yield was roughly unchanged overnight but began to creep higher in early U.S. trading. For the day, the 2-year yield climbed 2.7 bps to 1.68%, a new nine-year high (1.70% on October 20, 2008). The 2-year yield has risen in 33 of the last 47 sessions (since yields reversed higher on September 8 to begin their most upward channel). The 10-year yield had dropped 3 bps to 2.37% but clawed back to essentially unchanged (+0.7 bps) at 2.40%. Monday was the first day for the 10-year to close above 2.40% in November and just the sixth time since March. With the 10-year yield almost back to where it began the year, the 53 bps of net flattening in 2017 (between 2s and 10s) is the result of the 2-year yield’s cumulative 49 bps increase. In the absence of a clear catalyst for the turnabout in yields, market reports speculated it could have been related to similar move higher by European yields in the final hours of trading there.