“The fact that the Fed was so dovish on Wednesday, which was a result of the volatility we’ve seen in the financial sector ... has definitely been the big reason why we’ve seen this big bull steepening of the curve as the impact of monetary policy tightening starts to show up in the banking sector,” said Jeffery. Benchmark 10-year note yields fell as low as 3.285%, the lowest since Sept. 12. Two-year yields reached 3.555%, the lowest since Sept. 13. The inversion in the closely watched yield curve between two-year and 10-year notes narrowed to minus 27 basis points. Fed funds futures traders are now pricing in only an 11% chance that the Fed will hike rates by an additional 25 basis points in May, and an 89% probability it will leave the rate unchanged at 4.75% to 5.0% They also see the Fed cutting rates to 3.71% by December. Atlanta Fed President Raphael Bostic on Friday acknowledged banking sector woes made the central bank's rate hike call this week challenging, but he says the institution must continue to work to get inflation lower. Near-term, analysts expect bank concerns to be the main driver of market moves. “All we are doing right now, almost literally, is trading bank stocks via Treasuries,” said Jim Vogel, an interest rate strategist at FHN Financial in Memphis, Tennessee. “If you turn your computer off and turn it back on, it reboots in five minutes. If you unplug the valuation system for an entire sector of the stock market, you don’t plug it back in, it has to reboot over a long period of time, and unfortunately banks have to report their earnings and so everyone is going to hold their breath and buy more Treasuries until we start to see actual results from banks,” Vogel said. Investors have been on edge since the collapse of U.S. lenders Silicon Valley Bank and Signature Bank in mid-March, which was followed by UBS' emergency purchase of its ailing rival Credit Suisse on Sunday. U.S. Treasury Secretary Janet Yellen on Thursday sought to reassure jittery investors that American bank deposits were safe and promised policymakers had more firepower to battle any crisis even as bank stocks resumed their slide. Data on Friday showed that new orders for key U.S.-manufactured capital goods unexpectedly rose in February, but data for the prior month was revised sharply down, suggesting that business spending on equipment could be struggling to rebound in the first quarter.
March 24 Friday 9:13AM New York / 1313 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 4.49 4.6023 -0.069
Six-month bills 4.485 4.6632 -0.108
Two-year note 101-226/256 3.6033 -0.203
Three-year note 103-90/256 3.4271 -0.176
Five-year note 103-78/256 3.2679 -0.149
Seven-year note 104-88/256 3.2932 -0.130
10-year note 101-176/256 3.2983 -0.106
20-year bond 101-200/256 3.7469 -0.067
30-year bond 99-252/256 3.6257 -0.056
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 30.75 0.50
spread
U.S. 3-year dollar swap 18.00 0.00
spread
U.S. 5-year dollar swap 9.25 -0.25
spread
U.S. 10-year dollar swap -0.50 -1.00
spread
U.S. 30-year dollar swap -46.00 -0.50
spread
(Reporting by Karen Brettell; Additional reporting by Harry Robertson and Dhara Ranasinghe in London; Editing by Jonathan Oatis)
