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U.S. Feb PPI cooler than expected
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Feb retail sales fall more than expected
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Yields fall, 2s/10s inversion narrows
By Gertrude Chavez-Dreyfuss and Alden Bentley NEW YORK, March 15 (Reuters) - U.S. Treasury yields tumbled on Wednesday after U.S. data showed signs of economic weakness and cooling inflation, while problems at Swiss banking giant Credit Suisse added to concerns about the impact of rising yields on the global banking sector.
U.S. two-year yields, which reflect interest rate expectations dropped to 3.72%, the lowest since September and were last down 41 basis points at 3.817%. The yield on 10-year Treasury notes fell 21.1 bps to 3.426%. The yield curve, as a result, narrowed its inversion further, with the gap between two-year and 10-year yields contracting to -28.60 bps . That's the tightest spread since October. The curve was last at -40.9 bps.
The yield on the 30-year Treasury bond was down 12.9 bps at 3.626%.
Credit Suisse caught the market's attention on Wednesday following the collapse of Silicon Valley Bank last week, as European and U.S. bank shares dropped. Shares on Wall Street also fell as Credit Suisse's problems renewed concerns about a banking crisis.
Regulators and financial executives around the world have sought to assuage contagion fears after tech-focused lender SVB and another U.S. bank failed last week, but worries persist.
"Silicon Valley Bank and the other U.S. banks that failed over the last week were fairly sudden, but Credit Suisse has been in the news for months now with worries about their situation," said Steve Sosnick, chief strategist, at Interactive Brokers.
"The fact that their stock price was already so depressed tells us that the market was already somewhat fearful of events at that bank, but that said, a lot of times people don't really take risks to heart until it's staring them in the face."
Credit Suisse headlines overshadowed U.S. data that showed an economy slowing down.
U.S.
retail sales fell moderately, down 0.4% in February, after the prior month's outsized gain, but the underlying momentum remained strong, suggesting the economy continued to expand in the first quarter despite higher borrowing costs.
The producer price index also slipped last month, down
0.1% in February, versus January's revised 0.3% gain, much
cooler than the 0.3% monthly increase expected.
"The market right now has been really choppy in trying to price the Fed. I think that there’s a lot of people that are trying to find some reason to believe that they are going to pause here for some reason," said Tom Simons, money market economist at Jefferies in New York.
"I don't buy it, but if that's what you're looking for and you see a one tenth decline on PPI headline and some weakness in the trade services, and the stuff that reflects more easing in the supply chain pressure, you’ve got that evidence there," he added.
The rate futures market remained priced for a 25-bps hike next week by the Fed .
March 15 Wednesday 10:42AM New York / 1442 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 4.625 4.7447 -0.091
Six-month bills 4.4525 4.631 -0.245
Two-year note 101-134/256 3.8087 -0.416
Three-year note 102-146/256 3.7109 -0.344
Five-year note 102-98/256 3.4723 -0.324
Seven-year note 103-70/256 3.4662 -0.278
10-year note 100-176/256 3.4175 -0.218
20-year bond 101-192/256 3.7493 -0.159
30-year bond 100-12/256 3.6223 -0.139
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 22.50 1.00
spread
U.S. 3-year dollar swap 12.00 -1.00
spread
U.S. 5-year dollar swap 11.25 3.25
spread
U.S. 10-year dollar swap 5.50 1.25
spread
U.S. 30-year dollar swap -40.25 1.25
spread
(Reporting by Alden Bentley and Gertrude Chavez-Dreyfuss; Additional reporting by Ankika Biswas in Bengalaru and Karen Brettell; Editing by Andrea Ricci and Sharon Singleton)
