I'd be less than honest if I said I wasn't surprised how well the treasuries traded yesterday. Not that they were that strong — at their best levels yields were barely down 3 bps — but the 10-year did leave a bullish gap, the 30-year yield made it all the way back into the range from 2 Thursdays ago, and for the day yields first went down and then went sideways with no really selling ever developing.
That having been said, I did expect to see little net movement the first 2 days of this week and already the 10-year has filled the gap it left yesterday and yields are all very close to where they closed on Friday.
Little has changed as far as Fed Fund futures go, based on them the probability that rates remain at 3.50 until June hasn't really changed, nor has it changed for a cut to 3.25 in June, but who knows if that will be the case after release of the FOMC Statement tomorrow afternoon.
With not a lot going on in the treasury markets, I thought I'd touch on 2 markets for which it's just the opposite has been the case, gold and the dollar. Yesterday gold opened about $30 higher, rallied another $100 to a new all-time high of $5108, then sold off about $100, and around 5:00 it was back trading about $20 higher. It has gone up more than $600 in just the past 6 days, during which time the Dollar Index has gone down about 3%.
Going back to January of last year, gold has gone up more than $2200 while the dollar has declined by nearly 13%. For most of the past year both the dollar and treasury yields have dropped, especially short-dated treasury yields, which makes sense since a cheaper dollar makes treasuries more attractive to foreign investors, but while both yields and the dollar have dropped over the past 1-2 weeks, the 5-year yield has gone from its highest level in the past year, back into its range from 6 days ago, while the dollar has gone from its highest level in the past year, back to its lowest level since September of 2025. That was its lowest level since February of 2022, so something very different is happening right now.
If you compare yields, gold, and the dollar going back 30 years, you'll find times when there is a direct correlation between at least two of them, times when there's an inverse correlation between at least 2 of them, and times when there's no correlation at all.
So, what's happening with gold and the dollar right now may not have any impact on treasuries at all, but then again it might. I wouldn't be surprised to see yields move at least 30 bps based on what comes out of the FOMC meeting tomorrow and if I had to guess which way it would be my guess would be up.
