Street Color: Treasuries Slightly Weaker Overnight Ahead of Nonfarm Payrolls; 10-Year Breakevens Likely to Consolidate Following Recent Run Higher, Dealers Say
07:44 AM EST, 02/05/2021 (MT Newswires) -- Treasuries were slightly weaker overnight as investors await the official nonfarm payrolls data, dealers said. The yield curve remains near its steepest levels with 5s/30s at 148 basis points and 2s/10s at 104 basis points. Overnight flows showed light two-way action in US 10s.
The 10-year breakevens reached their highest level since May 2018 and within 2 basis points of territory not seen since 2014, prompting questions how much further rates can increase, or whether a pullback is needed. In the near to medium term, 10-year breakevens can rise to 2.25%, but with the fast stochastic approaching overbought and the proximity to CPI to consider, over the next few sessions a period of consolidation or modest drift lower appears the path of least resistance following nonfarm payrolls, dealers added.
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