Swap spreads much tighter this morning as the convexity hedgers have headed to the sidelines. Two year spread 5 basis points tighter at 38. Five year spreads also 5 tighter at 43 1/2. Ten year spreads 6 basis points tighter at 22 1/2 and 30 year spreads 6 basis points tighter at NEGATIVE 25 1/2.
There was a Wall Street Journal story over night which, I am told. said that the Fed thought that the higher rates were a function of an improving economy as well as a return of risk appetite.
Maybe the dollar is telling a different story. It has 1.41 handle this AM and gold is up $12. Breakevens on TIPS are off their worst levels (currently 184 ) but the trend there is decidedly wider.
Treasury bond prices are registering gains this morning. Some of that is real buying and some is month end buying.