US 5-year yields lead a post-UMich move

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US 5-year yields lead a post-UMich move

<p>The five-years space in Treasuries is always an interesting spot. There's a Fed influence there and short-term inflation is important but it's also a good measure of Fed credibility over the medium term and is caught in safe haven flows.</p><p>Today, it's down 4 bps to 3.63% with most of the move coming after the UMich consumer sentiment and inflation expectations data. That dip only half-erases yesterday's rise and barely puts a dent in the 100 bps rally since early August.</p><p>The chart isn't a pretty picture and that looks like it could be a break but it's also deeply oversold (prices move inverse to yields).</p><p>Ultimately, if you think the Fed has credibilty on inflation and you're worried about a recession or overtightening, getting 3.6% for five years is attractive. Corporate spreads over Treasuries add some more juice to the equation as well. A steady stream of foreign money into that space has helped to lift the dollar in the past month but a retracement would take the dollar down with it.</p>

                This article was written by Adam Button at forexlive.com.

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