U.S. government bonds strengthened, extending a two-week rally as investors continued to dial back expectations for inflation and tighter monetary policy.
Flummoxed by a rally that this week produced its 27th S&P 500 record of the year, investors are backing off bets that major indexes are headed downward.
The yield curve resumed its flattening trend in the past week with the 10-year Treasury note declining 9 basis points to 2.23% while the two-year note fell just 1 basis point to 1.34%. The 89 basis point spread between the two isn't as low as it got in late June (just 81 basis points), but its heading in that direction. The past week confirmed that trend to the downside with yields falling from 2.31% to 2.23%.