Swap spread opens with divergent trends, curve flattens, market enters defensive mode ahead of CPI

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汇通财经2026/04/10 11:55

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The swap spread market showed divergent trends at Thursday’s open, with the spread curve flattening. Money market rates rose, SOFR futures exhibited a bear-flattening trend, and the market is awaiting the release of US CPI data. This data is expected to reflect the inflationary impact of the Iran war. The two-year swap spread stood at -17.75 basis points, the five-year at -31.25 basis points, and the ten-year at -44.50 basis points.
After the ceasefire announcement, the probability of a rate hike has been priced out of federal funds futures, while the probability of a rate cut has risen slightly. However, the March Federal Reserve meeting minutes indicate that more officials are inclined to keep the door open for rate hikes, and some upgraded their inflation forecasts for 2026 due to the Iran war. The widening of short-end swap spreads is partly driven by defensive positioning ahead of data releases.
US Treasury yields were mixed, with the ends of the curve stable or up slightly by 1 basis point, while yields at other maturities edged lower. The market remained in a narrow range with light trading. The importance of the CPI report has increased further, as it will reflect the actual inflation impact of the Iran war. After a small dip during the London session, short covering pushed Treasuries back to their Tokyo session highs.
Financial corporate earnings season will begin on Monday. A surge in bond issuance is expected after the reports, but financial institutions typically hedge such issuance via swaps, so the widening of bond-related spreads is expected to be limited. Global equities rose while the US dollar weakened, and the market is waiting for the outcome of US-Iran talks over the weekend. Gold rose for a third consecutive week as investors repriced the possibility of a Fed rate cut this year. Brent crude is down 11% this week, but reports of Saudi production disruptions briefly pushed oil higher intraday.

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Swap spread opens with divergent trends, curve flattens, market enters defensive mode ahead of CPI

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