US Treasury yields moved towards a flatter curve on Tuesday, as market participants took profit after a rally in rates. Federal Reserve officials restated a cautious stance on inflation and a wait-and-see approach to monetary policy, while noting that AI is unlikely to affect the short-term neutral rate.<\/p>\n
Attention then turns to Wednesday\u2019s US data, including durable goods orders and industrial production. TD Securities expects durable goods orders to fall by -2.8% month on month, weaker than the consensus view, and expects industrial production to match consensus.<\/p>\n
The FOMC minutes are also due on Wednesday afternoon and may offer detail on differences within the committee. However, newer inflation and jobs data released since the meeting may reduce the minutes\u2019 usefulness.<\/p>\n
Looking back to February of last year, we saw a similar setup where the yield curve flattened as investors took profits. At that time, Fed officials urged a wait-and-see approach, creating a disconnect with a market that had rallied hard on rate cut expectations. This serves as a reminder that the path for monetary policy is rarely straightforward.<\/p>\n
Today, we see echoes of that caution, as the latest CPI data for January 2026 came in at 3.1%, slightly above forecasts. This inflation reading, combined with a very strong jobs report that added 353,000 positions, gives the central bank little incentive to ease policy soon. The Fed\u2019s patient stance is being validated by the incoming economic numbers.<\/p>\n
The 2s\/10s Treasury spread remains inverted at roughly -25 basis points, signaling market uncertainty about the timing of future cuts. This environment suggests options strategies that can capitalize on time decay and defined risk, such as selling short-dated credit spreads on interest rate ETFs. This profits from a market that is waiting for a clear directional catalyst.<\/p>\n
Given this dynamic, curve-steepening trades could face headwinds in the near term. A better approach may be to use calendar spreads on SOFR futures, betting that near-term rate expectations will remain anchored while deferred contracts can still fluctuate. This allows for a position on volatility without taking an outright bet on the direction of the entire yield curve.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Treasury yields flattened as traders took profits; officials stayed cautious on inflation ahead of key data, minutes.<\/p>\n","protected":false},"author":62,"featured_media":17028,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-42183","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/42183","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=42183"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/42183\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17028"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=42183"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=42183"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=42183"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}