Bonds Are In a Bit of a Deadlock

The 2-year U.S. Treasury note crossed the 2% threshold today for the first time since September 30, 2008, which was in the midst of its plummet after the Lehman Brothers blow-up. The catalyst for today's move was the stronger-than-expected reading in the CPI, with Labor Department data showing a rolling one-year average of 1.8 percentage points in the December CPI vs. market expectations for a 1.7% rate. While some might herald this as a long-delayed return to normalcy for the U.S. bond market, the stubborn refusal of the back end of the curve to climb is producing a scenario that is contractionary for financial intermediaries.

I have written about the spread between the 2-year and 10-year U.S. Treasuries often in my Real Money column, and it just keeps dwindling. The 2-10 spread sits at 55 basis points as I write this, versus a reading of 80 basis points three months ago and 99 basis points six months ago....526 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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