No recession on the horizon, despite flattening of the curve

<p>The Ten-year Treasury has been all over the place in the past few days, as the yield curve continues to flatten.</p> <p>There have been wild intraday swings as well as - of course - movement within the past few days.</p> <p>Thirty Capital Analyst Bryan Kern says: “We’ve seen a ton of volatility, but obviously the general trend is upwards.”</p> <p>The Two-year was up 16 bps and the Ten-year 18 bps, briefly touching 2.50 on Friday. In the last two weeks the Ten-year is up about 32 bps and about 42 bps on the Two-year.</p> <h1>Ten-year artificially low because of quantitative easing</h1> <p>Bryan believes that the Ten-year should be much higher than what it is, given all the qualitative easing that happened during the pandemic.</p> <p>Bryan says he doesn’t see a recession in the next 12 to 18 months, despite there being a lot of talk about an impending recession in the news.</p> <p>“I believe the Ten-year is artificially low because of quantitative easing,” he says. “Realistically, we shouldn’t be anywhere near an inverted curve with what’s going on.</p> <p>“Once the Fed stops buying treasuries, and if they actually quantitatively tightened, we'll see that Ten-year spike,” Bryan continues.</p> <p>He adds that there is a 75 percent chance of a 50-bps hike in May, and that it is likely the Ten-year will head higher, with the floor for the next quarter at 250.</p> <h1>Sticker shock on some SOFR pricing</h1> <p>Thirty Capital analyst Jay Saunders says some clients are experiencing sticker shock on some of the pricing of deals.</p> <p>Looking at SOFR swap rates, three-year SOFR swap rates were up 36 bps last week.</p> <p>The highest point on the SOFR swap curve right now is a three-year SOFR swap. It's the high-rate, high benchmark on the curve. From there, it goes downhill, all the way out to 30 years.</p> <p>Jay adds that the Three-year treasury has increased 144 bps in the first quarter of 2022. That’s the largest move up in the Three-year treasury in 50 years.</p> <h1>The short-end of the rate curve is very reacti