Persisting Bear Steepening Trend

The bear-steepening trend persisted on Monday, despite analysts' concerns about the extent to which long-term bond selling has occurred. Bear steepening refers to a situation where long-term interest rates rise at a faster pace than short-term securities.

Yield Movement

The yield on the 2-year Treasury BX:TMUBMUSD02Y saw a 3 basis points increase, reaching 5.13%. It's important to note that yields move in the opposite direction to prices.

Similarly, the yield on the 10-year Treasury BX:TMUBMUSD10Y rose by 5 basis points, bringing it to 4.49%. Likewise, the yield on the 30-year Treasury BX:TMUBMUSD30Y increased by 5.9 basis points to 4.59%.

Key Economic Indicators

The highlight of the economic calendar this week is the release of personal income and the PCE price index data, scheduled for Friday. Investors will consider various factors that have contributed to rising yields, including a strong labor market and an increasing supply of debt, despite signs of disinflation.

Treasury Auction Schedule

This week, the Treasury Department is set to auction $48 billion in two-year notes, $49 billion in five-year notes, and $37 billion in seven-year notes.

Analyst Insights

According to Ronald Temple, chief market strategist at Lazard, "Rates have reached a level that would take a sizable shock to induce material additional upside." This suggests that further increases may be challenging to achieve.

Tim Duy, chief U.S. economist at SGH Macro Advisors, interprets the Fed officials' use of the word "patience" as an indication that the central bank is more likely to raise interest rates in December rather than November. This is in contrast to last week's dot plot, which implies one more rate hike before the end of the year.

Economic Outlook Confirmation

To obtain confirmation that the economy will slow down in the fourth quarter, the necessary data will only be available during the December FOMC meeting. This assumes that the government avoids a shutdown and continues to release data on schedule, as outlined by economist Tim Duy.