US Treasury yields fell as investors considered what the latest developments in the banking sector and the Federal Reserve’s interest rate expectations could mean for the economy. The 10-year Treasury yield was down nearly six basis points to 3.3446% earlier today. The 2-year Treasury yield came in at 3.7226% after a decline of more than eight basis points.
Investors digested a week of central bank interest rate policy decisions and economic data reports as uncertainty remained over the future of the banking sector. Regional and international financial institutions have experienced tumultuous weeks, with the aftermath of the Credit Suisse takeover by rival bank UBS still ongoing. Swiss authorities have suggested that the collapse of Silicon Valley Bank in the US played a key role in Credit Suisse’s downfall, shaking investor confidence in the banking sector.
Following the latest Fed policy meeting, Chairman Jerome Powell stressed that the banking crisis played a role in central bank decisions and announced an interest rate hike of 25 basis points. Many investors have long hoped for a pause in rate hikes, amid fears that the Fed, by raising interest rates and keeping them higher for longer, could drag the US economy into a recession. Further guidance on the Fed’s policy plans is expected today, as St. Louis Fed Chairman James Bullard is expected to deliver. Also today is the latest report on durable goods orders.