Fed funds futures extended overnight gains into Asia trade, with the market-implied peak in U.S. rates dropping below 5.5% from above 5.6% and traders pricing about a 50% chance of a 50bp Fed hike this month, down from about 70% a day earlier. (Reporting by Tom Westbrook; Editing by Kim Coghill)
SINGAPORE, March 10 (Reuters) - Investors piled into
Treasuries along the curve on Friday, as hints of stress in the
U.S. banking system and of possible cooling in the labour market
prompted a reduction in U.S. rate expectations, while also
driving cash to the safety of bonds.
The Bank of Japan's decision to stick with ultra-low rates
and a cap on 10-year yields also boosted sentiment in Asia,
though with U.S. jobs data due later in the day and inflation
next week dealers said turnover was a little light.
The Asia-session buying extended overnight gains and pushed
down yields, which fall when prices rise, on all tenors.
Two-year U.S. Treasury yields fell as much as 15
basis points (bps) to a two-week low of 4.75% and are down
nearly 30 bps in two days, which if sustained would make for the
strongest two-day rally since last November.
Five-year yields were down nearly 15 bps to
4.0795%. Benchmark 10-year yields also fell 15 bps
to 3.8180%.
On Thursday bonds had rallied, bank stocks fell and traders
sharply cut rate hike expectations when startup-focused lender
SVB Financial said its customers were burning cash and
announced a capital raising to shore up its balance sheet.
Higher-than-expected jobless claims also offered a weak
lead-in for broader employment data due on Friday.
Commonwealth Bank of Australia strategist Martin Whetton
said the data and SVB news had markets nervous and rate
expectations were likely to be bumpy as traders parse economic
updates.
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