US Treasury bond yields have risen markedly, while investors continue to monitor the situation in the banking sector, and are also preparing for the March Fed meeting.
The yield on 5-year Treasury bonds grew by 10.4 basis points, reaching 3.674%, while the yield on 30-year bonds was 3.705% (+4.3 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, increased by 16.9 basis points to 4.093%, while the yield on 10-year bonds increased to 3.536% (+5.9 basis points). The curve between the 10-year Treasury yield and the 2-year yield remains inverted, sending a warning that the economy may be falling or has already fallen into recession. Now the gap between 10 and 2 year U.S. debt is 56 basis points.
Confidence in the banking sector improved somewhat after UBS, Switzerland's largest bank, agreed to buy the struggling Credit Suisse, the country's second-largest lender, for about $3.2 billion. The deal was facilitated by the Swiss National Bank, the Swiss government and regulatory authorities. Overall, the reaction of the authorities has eased some investor concerns about the stability of the financial system. At the same time, markets hope that problems in the banking sector may lead to a slowdown in the pace of rate hikes or even stop the tightening cycle by the world's central banks.
Now all the attention of market participants is switching to the Fed meeting, the results of which will be announced tomorrow and may contain new clues about the economic prospects and hints about the future policy of the Central Bank. According to the CME FedWatch Tool, markets see an 83.4% chance of a 25 basis point rate hike. Moreover, the markets consider it likely that the Fed will cut rates by 25 basis points already at the June meeting: the chances of such an event are estimated at 21.6%.