The yield curve for U.S. 5/30-year Treasury bonds has reached its widest since October 2021, with the risk of Trump dismissing Powell stirring the nerves of bond investors

The yield spread between the U.S. 5-year and 30-year Treasury bonds rose nearly 10 basis points, reported at +107.895 basis points, approaching the peak of +114.492 basis points on October 6, 2021, and the peak of +166.984 basis points on February 24 of that year.

Since various reports about former President Donald Trump potentially firing Federal Reserve Chairman Jerome Powell were released, the front and belly of the U.S. Treasury market have outperformed the broader market, leading to a significant steepening of the U.S. Treasury yield curve, pushing the 5-year 30-day interest rate swap curve to its widest level since 2021.

The shift towards dovish front-end rates has reflected a rate cut premium of about 16 basis points in the September policy meeting, while the rate cut reflected at Tuesday's close was 13 basis points. Additionally, the swap curve has fallen back to an expectation of easing by about 50 basis points for the remainder of this year, compared to 43 basis points previously. The 5-year 30-day interest rate swap spread and the 2-year 10-day interest rate swap spread widened by 9 basis points and 7 basis points, respectively, while the 2-year 5-year 30-day interest rate swap spread fell by about 7 basis points from Tuesday's closing level