U.S. Treasury yields rise for the fifth straight week

Expectations for further rate hikes pushed Treasury yields higher. They now reach levels not seen in three months. The 10-year benchmark rate hit its highest level since Nov. 9 (3.95%). The 2-year yield, meanwhile, rose to 4.78%. Yield curve inversion (-83 basis points) is deepening, leading to heightened concerns about a possible U.S. recession. Furthermore, the Fed decreased its balance sheet by $51 billion over the last three weeks, and almost $170 billion since the beginning of the year. The unwinding of its balance sheet drains liquidity, which also drives yields higher. 

In Europe, the yield on the German 10-year Bund gained 10 basis points to 2.54% from 2.44%. The French OAT yield moved up in unison (+10 basis points at 3.01%). 

The corporate bond market retreated as investors' risk appetite was waning.

Investment grade corporate bond prices were down 0.62% in Europe (IBOXX € Liquid Corporates index up 0.75% year-to-date) and down 1.18% in the U.S. (IBOXX Ishares $ Investment Grade Corporate Bond Index up 0.43% YTD). 

High-yield bonds slid 0.41% in Europe (IBOXX € Liquid High Yield Index up +2.97% YTD) while they edged down 0.11% in the U.S. (Markit iBoxx USD Liquid High Yield Capped Index up +1.48% YTD). Emerging debt dropped 0.47% (+1.11% YTD), weighed again by a strong greenback. The dollar index topped 105.25 (+1.35% over the week).