US Treasury Market: Short-term US Treasuries Plunge Sharply as Market Rate-Cut Bets Weaken

MaticHoleFiller · 2026-03-12T23:31:06+00:00

The U.S. Treasury market is showing a pronounced bear market and a flattening yield curve. As oil prices rise, traders have reduced their expectations for Federal Reserve rate cuts, while robust demand for 30-year Treasury issuance is pushing the curve's yield spread to narrow. Short-term rates are rising, with market participants pushing forward their expectations for rate cuts to mid-2025.

MaticHoleFiller

2026-03-12 23:31:06

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U.S. Treasury bonds are showing a clear flattening trend in a bear market. As oil prices continue to surge, traders quickly unwind the Fed rate cut premium on the short end of the yield curve. The $22 billion 30-year Treasury issuance received solid demand, and inflows into flattening trades in the futures market further pushed the intraday yield curve to narrow significantly, suppressing long-term yields from rising.

Shortly after 3:30 p.m. New York time, the short-term U.S. Treasury yields rose about 10 basis points, causing the 2s10s and 5s30s spreads to narrow by 6 and 7 basis points respectively from Wednesday’s close; the 10-year Treasury yield was around 4.26%, up 3 basis points intraday.

The movement at the short end of the curve was particularly notable, with traders quickly reducing bets on rate cuts this year. Market expectations for a rate cut at the December Federal Reserve meeting are only 18 basis points, down from 29 basis points at Wednesday’s close. The fully priced-in 25 basis point rate cut has been pushed back to mid-next year.

Strong demand for the 30-year Treasury also intensified flattening pressure. The 2s10s spread approached its flattest level of the year late in the session. The auction’s winning yield was below the trading level before the auction. Primary dealers’ allocation ratio rose to 9.4%, up from a record low last month; direct bidders’ share increased to 27.2%, while indirect bidders’ share decreased to 63.4%.

As of 4:55 p.m. New York time, the 2-year Treasury yield was 3.7386%.

The 5-year Treasury yield was 3.8661%.

The 10-year Treasury yield was 4.2609%.

The 30-year Treasury yield was 4.8816%.

The 5s30s spread was 101.19 basis points.

The 2s10s spread was 51.61 basis points.

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