Offline24h

UST curve steepened mildly, with 2Y yield climbing 1.45bp to 3.47% and 3Y up 0.28bp to 3.525%, while 10Y dipped 2.16bp to 4.147% and 30Y fell 3.17bp to 4.829%. Short-end pressure stemmed from resilient employment data offsetting soft-landing bets, keeping front-end yields elevated amid sticky inflation risks tied to tariffs and fiscal expansion under current policy shifts. Mid-to-long curve softened on global growth optimism and anticipated central bank easing, though curve positioning reflects caution on sustained rate cuts given robust U.S. economic momentum. Market dynamics favored short-duration bonds over long-end exposure, as steepening supports mid-short term relative value plays with better carry-to-risk ratios. Credit spreads tightened selectively in IG financials and high-quality HY, bolstered by stable funding conditions and benign default forecasts, yet non-IG segments eyed volatility from liquidity draws in event-driven trades. MBS and CLOs held steady, with prepayment convexity aiding duration stability amid moderate volatility. Outlook tilts neutral-to-cautious: expect 10Y UST rangebound 4.10-4.30% as Fed funds path hinges on January data prints, with 25bp cuts paced through mid-year if core PCE eases below 2.5%. Positioning leans tactical—extend in 2Y-5Y buckets on dips, layer sub-5% IG credits for yield pickup, hedge curve risk via payers in 2s10s swaps. Risks skew to reflation surprises lifting yields 10-15bp, favoring barbell portfolios blending short Treasuries and selective EM debt for alpha. Volatility regimes persist, prioritizing liquidity buffers and dynamic duration at 4-6 years.