May 2023 Market Review

U.S. Treasury yields moved higher in May, driven by softening economic data and hawkish rhetoric from several Fed speakers, who left the door open for more hikes after an anticipated “pause” at the June meeting. The front end led the move, with the 2-year U.S. Treasury note closing out the month 35 basis points (bps) higher at 4.47%. Heavy corporate issuance added to technical pressures further out the yield curve.

Continued uncertainty around the resolution of the debt ceiling led to high volatility in the short Treasury bill market, with early June maturities reaching yields above 7%. As Memorial Day weekend approached, short Treasury bill yields fell back toward 5% and the curve bear flattened, with policy makers beginning to finalize the terms of a debt ceiling deal.

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