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Treasury Yields Plunge as Traders Readjust Rate Hike Expectations

Published 2023-03-14, 07:56 a/m
USD/CAD
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Treasury yields, which had jumped to their highest level in more than a decade last week, fell sharply Friday, in the wake of the collapse of Silicon Valley Bank, a major lender to tech startups. Investors piled into investment grade bonds, moving capital away from risky investments amid fears of contagion through U.S. regional banks. The Federal Reserve is now under pressure as SVB is seen as the first major victim of its quantitative-tightening program and endless rate hikes. A growing number of marker players are calling on the U.S. central bank to slow down or even freeze rate hikes. Traders have readjusted their expectations for how much higher U.S. interest rates could climb this year. Fed Fund futures closed at 94.72 Friday vs. 94.56 a week ago.

The yield on the benchmark 10-Year U.S. Treasury Note fell 26 basis points from 3.96% to 3.70%. In Europe, the yield on the German 10-year Bund was down 21 basis points to 2.51%.

 

Investment grade corporate bond prices were up +1.15% in Europe (IBOXX € Liquid Corporates index) and up +1.06% in the U.S. (IBOXX Ishares $ Investment Grade Corporate Bond Index).

High-yield bonds edged up +0.08% in Europe (IBOXX € Liquid High Yield Index) but shed -0.98% in the U.S. (Markit iBoxx USD Liquid High Yield Capped Index).

Lastly, emerging debt in local currencies chalked up a 0.39% gain.

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