Treasury bonds are taking a severe drubbing and the yield on the benchmark 10 year note is approximately at the level which prevailed on the day when the Federal Reserve announced quantitative ease (2.96 percent currently).
One participant noted that the 200 day moving average on the Long Bond was 3.798 percent and the market penetrated that level this morning as a sharp knife would melting butter.
The yield curve has steepened sharply and participants are deeming the belly of the curve particularly odious. The 2year/10 year is once again close to 200 basis points and the 2year/5year/30 year butterfly has returned to 93 basis points after a foray into the low 100s.
Dealers report rate lock selling and fear of very heavy Treasury supply next week. As I have mentioned too often the Treasury will announce around $ 100 billion of new supply tomorrow. It will consist of 2year,5 year and 7 year notes.