Treasury Yields Soar as Strong PMI Data Triggers Market Repricing
The US Treasury yield curve has surged significantly after the release of strong S&P Global PMI data. The 2-year Treasury yield rose by 14 basis points (bps) to 4.89%, while the 10-year Treasury yield increased about 10 bps to close at 5.1%. This move in yields was substantial, but not entirely unexpected, given the economic data.
The sudden repricing has some market participants taking notice, particularly with a potential move towards 5% no longer seeming far-fetched. Meanwhile, the US Dollar Index (DXY) broke above resistance at 100.50 and is now targeting the 101.80 to 102 region. A stronger dollar could further tighten financial conditions, especially if credit spreads continue to widen.
The recent strength in the dollar has not yet been transmitted through cross-currency basis swaps, which is a crucial aspect of global dollar liquidity. This transmission channel will be closely watched as financial conditions continue to tighten.