US Treasury Spreads

3-month yield minus 1-month yield: +1.72

10-year yield minus 2-year yield: -0.60 

10-year yield minus 3-month yield: -1.57

30-year yield minus 3-month yield: -1.37

What's Going On?

The huge inversions, led by the 10-year minus 3-month yield, are a very strong recession signal.

The record spread between the 3-month and 1-month T-Bills is an artifact of the debt ceiling. 

Debt-Ceiling Standoff Warps Treasury Trading

The Wall Street Journal reports Debt-Ceiling Standoff Warps Treasury Trading

Investors are piling into ultrashort-term Treasury bills to avoid getting caught up in the debt-ceiling drama.

Surging demand has driven one-month T-bill prices higher, sending the yield down to 3.313% from 4.675% at the end of March. Bills maturing in three months yield 5.105%—a record incentive for lending to the government for a couple months more, according to Tradeweb data going back to 2001.

Gennadiy Goldberg, senior U.S. rates strategist at TD Securities in New York, attributes roughly 70% of the current distortion in the short-term Treasury market to issues related to the debt ceiling and the rest to uncertainty about the course of interest rates.

Meanwhile, the lack of government refunding has led to a shortage of Treasury bills, reducing supply and lifting prices. The Treasury's checking account at the Fed, known as the Treasury General Account, recently declined below $87 billion, from $964 billion last May.