U.S. Treasury prices rose, with yields easing across the curve, as shares of First Republic Bank dropped more than 35% after the company reported a more than $100 billion plunge in deposits in the first quarter. This raised fears that Wall Street has not seen the last of the regional banking crisis, while U.S. consumer confidence fell to a nine-month low in April fuelling worries of an economic recession.
The 10-year U.S. yield eased to 3.40% levels, down 20 basis points in the last four sessions to Tuesday, while odds of a rate hike by Federal Reserve eased to below 80% from above 90% at the start of the week.
Meanwhile, the Reserve Bank of India (RBI) maintained status quo on its policy rate earlier this month, and easing inflation has cemented bets of a prolonged pause. India's March retail inflation dropped to 5.66% and is set to ease below 5% in April. "We think that the end of RBI hike cycle (per our forecast) and headline CPI prints falling back into target range would create a more duration-positive environment for bonds," DBS Bank said in a note.
While bond yields ended higher on Tuesday, the benchmark yield had dropped to its lowest level in a year amid strong buying from foreign banks as well as traders.
Foreign banks have bought bonds worth over 150 billion rupees ($1.83 billion) on a net basis in the last six sessions, data from Clearing Corp of India showed. KEY INDICATORS: ** Brent crude futures contract 0.1% higher at $80.85 per barrel after easing 2.4% in the previous session ** 10-year U.S. Treasury yield at 3.4048% and two-year note at 3.9263% ** RBI to auction Treasury bills worth 320 billion rupees ($1 = 81.9450 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Sohini Goswami)
