Price Pressure Sends Yields to New Highs

Strong PPI data and weak demand at Treasury auctions have pushed US yields to multi-year highs. CA-CIB recommends being long 20Y swap spreads based on relative value analysis.

Key Takeaways

• 1.Treasury yields have reached new highs driven by a strong PPI report and a core CPI reading of 2.8% YoY.
• 2.Weak demand in recent Treasury refunding auctions led to a tail in the 3Y, 10Y, and 30Y bonds, with the 30Y hitting a 5.00% coupon.
• 3.CA-CIB recommends a long position on 20Y swap spreads due to high correlation with curve volatility and good relative value.

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