One of the interesting disconnects during the non stop US stock market rally over the past month was the action in US Treasuries as 10 yr yields were basically flat during the whole equity move, sort of a goldilocks scenario. What did begin to change over the past few weeks was a rise in short terms rates as US$ LIBOR and the 2 yr note headed higher and the yield curve experienced a bear flattener. Possibly in response to the Fitch downgrade of Portugal where we are all reminded again of sovereign debt issues, the 10 yr US yield is breaking out above the key 3.75% level and is now at the highest in a month. German bunds are also lower. The better Durable Goods report ex transports is also an influence and we’re seeing too a spike in 2 yr note yields to the highest since Jan 4th at 1.06%, up a large 8 bps on the day.
