The short-term returns of the us treasury fall this Monday, since the collapse of the Silicon Valley Bank It led investors to slash expectations of a big interest rate hike by the Federal Reserve and to seek the safety of government debt.
The return on year-year notes fell 39 basis points (bp) to 4.192%, its lowest level since February 3 and the biggest one-day drop since the 2008 financial crisis.
It also posted its biggest three-day decline of 87bp since the “Black Monday” stock crash of 1987. Yields move inversely with prices.
The Fed pledged to ensure that depositors at the now-shuttered Silicon Valley Bank had access to their funds.. On Monday, HSBC said it would acquire the UK unit of SVB.
In light of the crisis, Goldman Sachs predicted that the Fed will not raise rates at its meeting next week, helping fuel a massive increase in short-term government debt.
“We no longer expect the FOMC (Federal Open Market Committee) to raise rates at its next meeting on March 22,” Goldman analysts, led by chief economist Jan Hatzius, said in a note.
“We have kept our forecast for 25 basis point hikes from the FOMC unchanged in May, June and July, and now expect a terminal rate between 5.25% and 5.5%, although we see considerable uncertainty about the path,” he added. The yield on the 10-year paper fell 16 bp to 3.534%, also the lowest since February 3.
Source: Ambito
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