Days later Silicon Valley failed, sparking a rout in banking stocks and fears not only that central bank monetary tightening would spark a recession as rising credit costs crunched both businesses and households, but also of a global banking crisis.
The rise in yields suggests a massive flight to quality
last week and early in Asia has ebbed.
"All the major central banks are behind making sure that things turn out right," said Tom di Galoma, co-head of global rates trading at BTIG, speaking in London.
"Nobody has cut rates, but at the same time there's a growing feeling amongst U.S. investors, and especially from myself, that the Fed probably has to take a pass this week and probably won't increase rates," said New York-based di Galoma.
Fed funds futures show a 26.9% probability of the Fed
holding its overnight rate at a current 4.5%-4.75% when
policymakers conclude a two-day meeting on Wednesday, CME's
FedWatch Tool shows.
But the market also is betting the Fed cuts rates this summer and that by December its target rate is 3.912%, down from roughly 5.6% two weeks ago. Late on Sunday, UBS Group AG agreed to buy Credit Suisse Group AG in a deal engineered by Swiss authorities. UBS will pay 3 billion Swiss francs ($3.23 billion) for its smaller rival and assume up to $5.4 billion in losses.
The takeover came after the 167-year-old Credit Suisse became the biggest victim of the turmoil unleashed by SVB's collapse, even after it received $54 billion in funding from the Swiss National Bank last week. The central banks' action on Sunday echoed steps taken to offset the impact of the COVID-19 pandemic in 2020 and efforts to bolster global finances after the U.S. housing market cratered and stoked the Global Financial Crisis in 2007 to 2009. The yield on benchmark 10-year Treasury notes rose 6.3 basis points to 3.460%.
The Treasury yield curve measuring the difference between yields on two- and 10-year notes , which is seen as a recession harbinger, narrowed at -44.0 basis points.
The curve last week reduced its inversion to -28.6 bps, the narrowest spread since October, as investors quickly reduced the rate hike scenarios this year. The 10-year TIPS breakeven rate was last at 2.117%, indicating the market sees inflation averaging about 2.1% a year for the next decade.
March 20 Monday 9:56 a.m. New York / 1356 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 4.41 4.5189 0.060
Six-month bills 4.5975 4.7822 0.028
Two-year note 101-90/256 3.8947 0.049
Three-year note 102-108/256 3.7591 0.057
Five-year note 102-24/256 3.5342 0.068
Seven-year note 102-224/256 3.5292 0.070
10-year note 100-84/256 3.4603 0.063
20-year bond 100-208/256 3.8162 0.053
30-year bond 99-128/256 3.6525 0.051
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap spread 24.75 -2.00
U.S. 3-year dollar swap spread 12.75 -1.75
U.S. 5-year dollar swap spread 9.50 -2.00
U.S. 10-year dollar swap spread 2.00 -1.75
U.S. 30-year dollar swap spread -44.00 -0.75
(Reporting by Herbert Lash, additional reporting by Ankur Banerjee in Singapore and Georgina Lee in Hong Kong; Editing by Simon Cameron-Moore and Chizu Nomiyama)
Messaging: herb.lash.reuters.com@reuters.net))