Real Yields Drive Climb In Tsy Yields As Breakevens Fall Back

• The reversal in Tsy yields on the day per the earlier bullet has come about with a marked increase in real yields as inflation breakevens slide lower.
• 5Y nominal yields sit 14bps higher on the day but at 2.78% are still some 4bps lower than prior to last week’s Q2 GDP miss and its sluggish internals, driven by a 18.5bp surge in real yields back into positive territory at +8bp after turning negative with that GDP report.
• The drive in real yields started prior to the US open but has continued ever since, seemingly bolstered by a safe landing for Pelosi plus potentially SF Fed's Daly ('24 voter) on work being far from done after
• The 5Y breakeven has fallen 4.5bps on the day to 2.71%, still 12bps higher than before the Jul FOMC and 21bps above early July lows (with that 2.5% also close to pre-taper levels), but considerably below the post-Ukraine war average of 3.09% and very close to the 2H21 average.

Source: Bloomberg