By Gertrude Chavez-Dreyfuss
NEW YORK, March 16 (Reuters) – U.S. Treasury yields fell on Thursday as investors continued to weigh ongoing global banking stress against U.S. economic data, which continued to show resistance to multiple Federal Reserve rate hikes.
* The return on US debt has fallen on five of the last six days. However, they barely reacted to the European Central Bank’s rate hike of 50 basis points (bp) to 3.50%, despite the turmoil in financial markets.
* That tension was sparked by the bankruptcy of San Francisco-based Silicon Valley Bank last week and the troubles at Credit Suisse. The European bank ended up borrowing as much as $54 billion from Switzerland’s central bank after falling shares intensified fears of a global banking crisis.
* This gave investors some confidence that Credit Suisse’s situation would eventually stabilize.
* The yield on the 10-year Treasury note was down 11 basis points to 3.384%, while the yield on the 30-year note was down 10.1 bp to 3.587%.
* The yield curve deepened its investment, with the gap between the return of two-year and 10-year paper at -54.4 bp. Earlier in the week, this curve inverted as traders began to discount some of this year’s rate hikes.
Two-year US bond yields, which typically reflect interest rate expectations, fell 5.1 basis points to 3.924%.
* US economic data was generally strong. Jobless claims fell more than expected to a seasonally adjusted 192,000 claims in the week ending March 11. Economists polled by Reuters had forecast 205,000 applications for the past week.
* Home construction rose nearly 10% last month, as did building permits. However, the Philadelphia Fed’s manufacturing index fell to -23.2.
* Quincy Krosby, chief global strategist at LPL Financial, in emailed comments, said the Fed will “make it clear that the stability of the banking system remains strong.” “However, if there were to be further deterioration within the regional banks, or another outburst, the Fed might consider a pause,” he added.
(Reporting by Gertrude Chavez-Dreyfuss; Editing in Spanish by Javier Leira)
Source: Ambito
