U.S. Treasury prices rose, with yields dipping below key levels on concerns that the banking turmoil is not yet over after regulators seized First Republic Bank and sold its assets to JPMorgan Chase & Co, in a deal to resolve the largest U.S. bank failure since the 2008 financial crisis. The 10-year yield dropped below the 3.45% handle, while the two-year yield, which is a closer indicator of interest rate expectations, declined below the crucial 4% mark. Bets have strengthened that the Fed will reverse its interest rate-hiking course sooner than expected, amid a wide sell-off in regional bank stocks and signs that government funds will run short by June. The Fed's policy decision is due later in the day, wherein a 25 basis-point rate hike is widely factored in, and the focus would be on Chair Jerome Powell's comments. The odds of a 25-bps hike have, however, eased to 88% from 95% a day ago. The Fed rate currently stands at 4.75%-5.00%, and traders anticipate a status quo on rates after Wednesday's hike.
Apart from the Fed meet, the focus would remain on the weekly debt auction through which the central government aims to raise 330 billion rupees ($4.04 billion) on Thursday. The auction includes 140 billion rupees of benchmark 2033 paper after a similar sale on April 21 witnessed stronger-than-expected demand and triggered a rally. KEY INDICATORS: ** Brent crude futures contract was little changed at $75.30 per barrel after declining 5.03% in the previous session ** 10-year U.S. Treasury yield was at 3.4352% and two-year note at 3.9737% ** RBI to auction Treasury bills worth 320 billion rupees ($1 = 81.7570 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Sohini Goswami)
