The two-year yield , which falls with traders'
expectations of a less hawkish Fed, fell to 3.9597% from
Tuesday's close of 4.177%. The yield on benchmark 10-year
Treasury notes retreated to 3.4509% from Tuesday's
3.606%. Global markets have been thrown into chaos in the past two
weeks after the sudden failures of U.S. lenders Silicon Valley
Bank and Signature Bank , and an emergency sale
of beleaguered Swiss banking behemoth Credit Suisse .
Efforts by regulators and policymakers globally to counter
the convulsions in the banking sector have helped stem contagion
and a rout in equity markets, though many investors fear other
smaller lenders could be next in line to fail as credit markets
tighten.
PERSISTENT INFLATION
The Fed's signal that it might pause its policy-tightening
cycle comes as price pressures remain stubborn despite months of
rate rises.
Data also showed British inflation unexpectedly rose to
10.4% in February, lifting expectations for a quarter point rate
hike at Thursday's Bank of England meeting, boosting sterling.
European bonds have gone along for the ride. German two-year
yields overnight recorded the biggest daily jump
since 2008 as markets went back to pricing in more ECB hikes.
The euro meanwhile touched a near seven-week high at $1.0940 , while sterling rose as much as 0.5% to $1.2274 after the British inflation data.
The dollar index fell on the Fed's dovish note, shedding 0.62%, and a softer dollar lifted the yen to 131.39 . HOT SPOTS Markets, unnerved by the banking sector turmoil, remained alert to signs of stress elsewhere.
The upheaval sparked by the collapse of Silicon Valley Bank is not yet over, and a significant number of banks will fail within two years, hedge fund Man Group CEO Luke Ellis said at a conference in London on Wednesday. "I think we will have significantly more banks that don't exist in 12-24 months," Ellis said, adding that he thought smaller and regional banks in the United States and challenger banks in Britain could be at risk. First Republic Bank was also in focus after efforts to secure a capital infusion continued without success on Tuesday. The stock shed 15.5% late on Wednesday after Treasury Secretary Janet Yellen said there is no discussion to insure all deposits. "The banking crisis is creating tighter credit conditions, and if you tighten conditions you weaken economic activity which puts more pressure on the banking sector," said Savary at Prime Partners. "I don't consider the banking crisis is over." A softer dollar also buoyed oil prices. Brent crude rose $1.37, or 1.8%, to settle at $76.69 a barrel, while U.S. crude ended $1.23, or 1.8%, higher at $70.90. Gold, which has benefited from safe-haven funds seeking a refuge from the banking crisis, jumped on Wednesday as some investors took note of the Fed's signal that rates might be peaking for now. Gold does well in a lower-rate environment as it yields no interest.
Spot gold prices rose 1.41% to $1,967.53 an ounce. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Global FX performance Global asset performance Fed QT in question? ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Dhara Ranasinghe; Additional reporting by Wayne Cole in Sydney, Editing by Alison Williams, William Maclean, Marguerita Choy and Diane Craft)
