Time period spreads rising barely, yields (nominal, actual) down, and danger measures up.

One nominal charges have dived; actual charges as nicely, suggesting the majority of the motion is motion in perceived future financial exercise.

Determine 1: High panel: 10yr-3mo Treasury unfold (blue), 10yr-2yr unfold (tan), each in %; Center panel: 5 12 months Treasury-TIPS unfold (purple), 5 12 months unfold adjusted for liquidity and danger premia (purple); Backside panel: VIX (sky blue, left scale), EPU (black, proper scale). Supply: Treasury by way of FRED, KWW following D’amico, Kim and Wei (DKW), CBOE by way of FRED, policyuncertainty.com. 

The 5 12 months yield dropped 46 bps as we speak, whereas the 2 12 months dropped 27 bps. Actual or nominal results? Right here’re the corresponding 5 12 months nominal and actual charges.

Determine 2: 5 12 months Treasury yield (blue), TIPS (tan), each in %. Supply: Treasury by way of FRED.

Over the past week, nominal 5 12 months charge has fallen 75 bps, whereas the TIPS yield has fallen 61 bps. That is suggestive of an actual decline — which in fact might be pushed by the outlook for the actual economic system, or by expectations of Fed coverage tightness (see the earlier submit on the implied path of the Fed funds charge).