US Treasury Prices Extend Losses as Oil Tops $90 a Barrel

U.S. Treasury prices extended their losses in late trading, with short-dated bonds leading declines and the yield curve flattening after oil prices climbed above $90 a barrel for the first time since late July. According to Sina Finance, overnight index swaps were also pricing in more rate hikes, with a 25-basis-point increase at the Federal Reserve's October meeting now fully priced in. Short- and intermediate-dated Treasury yields rose the most after 3 p.m. in New York, while the 2s10s and 5s30s spreads narrowed by 0.5 basis point and 3 basis points, respectively. The 2s5s30s butterfly spread widened by about 3.5 basis points and finished near its intraday high. WTI crude futures were up about 5.4% at around 3 p.m. U.S. Treasury losses deepened as oil continued to rise, after the latest U.S. strike on Iran stoked concerns about prolonged disruption to energy shipping through the Strait of Hormuz. In the cash market, long-end swap spreads narrowed slightly and were expected to end a three-session widening streak. Front-end interest-rate swaps showed about 17 basis points of additional tightening priced in for the September policy meeting, with 40 basis points of cumulative hikes priced in for the year, above Monday's close of 38 basis points. At 4:59 p.m. U.S. Eastern Time, the 2-year Treasury yield was 4.3998%, the 5-year yield was 4.5551%, the 10-year yield was 4.7981%, and the 30-year yield was 5.273%. The 5-year and 30-year yield spread was 71.71 basis points, while the 2-year and 10-year spread was 39.41 basis points.