Falling Breakevens Help Cap Yield Gains

Treasuries traded weaker Friday, with a renewed rise in short-end yields bear flattening the curve.

• In a week dominated by big swings in Treasury yields and big equity declines, oil stole the show Friday, with WTI dropping 6.8% on the session.
• This helped 5Y and 10Y TIPS-implied breakevens fall to the lowest levels since February. In turn, that helped cap yield gains in an otherwise risk-on session, with the Nasdaq rallying in the afternoon.
• The 2-Yr yield is up 5.8bps at 3.1512%, 5-Yr is up 4.2bps at 3.326%, 10-Yr is up 2.9bps at 3.2237%, and 30-Yr is up 3.4bps at 3.2812%.
• Fed communications (George, Bullard, Kashkari) generally leaned hawkish where they leaned at all (nothing new from Chair Powell), helping pull short-end yields off session lows.
• Data (industrial production, leading index) added to the recent string of concerning reports but didn't draw any market reaction.
• With a market holiday Monday, attention will swiftly turn to Powell's congressional testimony next Weds and Thurs.