TREASURIES-U.S. yields fall as banking tension outweighs solid economic data

Kitco Media
By Reuters
Published:
Updated:
Reuters
By Gertrude Chavez-Dreyfuss NEW YORK, March 16 (Reuters) - U.S. Treasury yields slid in choppy trading on Thursday, as investors continued to weigh the ongoing global banking tension against U.S. economic data that continued to show resilience in the face of multiple rate hikes from the Federal Reserve.


U.S. yields have fallen in five of the last six days. They showed little reaction, however, to the European Central Bank's rate hike of 50 basis points (bps) to 3.50% despite turmoil in financial markets. That tension was triggered by the collapse
of San Francisco-based Silicon Valley Bank last week and problems at Credit Suisse .


The European lender ended up borrowing up to $54 billion from Switzerland's central bank, after a slide in its shares intensified fears of a global banking crisis. That somewhat restored some investor confidence the Credit Suisse situation would stabilize eventually. In mid-morning trading, the yield on 10-year Treasury notes was down 11 bps at 3.384%.


U.S. 30-year bond yields were


dropped


10.1 b ps to


3.587 %.


The U.S. Treasury yield curve, meanwhile, deepened its inversion, with the gap between the two-year and 10-year yield at -54.4 bps . This curve has earlier in the week narrowed its inversion as traders started to price out some of the rate hikes this year. U.S. two-year yields, which typically reflect interest rate expectations, were down 5.1 bps at 3.924%.


U.S. economic data were solid overall.


U.S. jobless claims fell more than expected to a seasonally adjusted 192,000 in the week ended March 11. Economists polled by Reuters had forecast 205,000 claims for the latest week. Housing starts bounced nearly 10% last month with building permits higher as well. However, the Philadelphia Fed manufacturing index plunged to -23.2. Fed funds futures on Thursday priced in a 25-basis point hike by the Fed at next week's meeting in the wake of positive data overall, with the inflation focus outweighing the financial sector crisis. Quincy Krosby, chief global strategist at LPL Financial in emailed comments said the Fed "will make it clear that the stability of the banking system remains strong." "However, should there be further deterioration within the regional banks, or another blowup, the Fed may consider a pause."


March 16 Thursday 10:22AM New York / 1422 GMT Price Current Net Yield % Change (bps) Three-month bills 4.6 4.7181 -0.037 Six-month bills 4.5625 4.7474 0.052 Two-year note 101-79/256 3.9217 -0.053 Three-year note 102-104/256 3.7676 -0.077 Five-year note 102-80/256 3.4873 -0.096 Seven-year note 103-88/256 3.4547 -0.109 10-year note 101 3.3802 -0.114 20-year bond 102-68/256 3.7129 -0.094 30-year bond 100-188/256 3.5847 -0.103
DOLLAR SWAP SPREADS


Last (bps) Net


Change


(bps)
U.S. 2-year dollar swap 27.25 2.75
spread
U.S. 3-year dollar swap 16.75 2.25
spread
U.S. 5-year dollar swap 12.00 0.50
spread
U.S. 10-year dollar swap 5.00 -0.50
spread
U.S. 30-year dollar swap -41.25 -0.75
spread



(Reporting by Gertrude Chavez-Dreyfuss; Editing by Andrea Ricci)

Messaging: rm://gertrude.chavez.reuters.com@reuters.net))
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