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Extending Highs, 10s Back to Late 2023 Levels, Banks Sagging

US TSY FUTURES
  • Treasury futures appear to be discounting yesterday's "no rate cut in March" expressed by Fed Chairman Powell post FOMC.
  • Rates are swinging gapping higher now - highest levels since late December '23 with TYH4 tapping 113-06.5 high (+28), well through initial resistance of 112-26.5 (Jan 12 high) focus on 113-12 (Dec 27 high and bull trigger). 10Y yield falls to 3.8203% low.
  • Driver appears to be related to wider concerns over NY regional banks after New York Community Bancorp fell over 40% yesterday, is down 14% again today after they cut it's dividend and posted a loss on purchase of collapsed Signature Bank shares.
  • Meanwhile KBW Regional Banking Index is down -5.13% at the moment. Financials sector shares are weighed down by larger banks amid some concern over spreading risks: Zion Bancorp -9.14%, M&T Bank -6.62%, Comerica -6.18%, Keycorp -6.09%.
  • Knock-on effect to surge in Tsy futures: Projected rate cut chances are higher - above post-FOMC highs: March 2024 chance of 25bp rate cut currently -45.5% vs. -63.5% post FOMC w/ cumulative of -11.4bp at 5.200%, May 2024 at -98.2% vs. -97.2% w/ cumulative -35.9bp at 4.955%, while June 2024 climbs to 116.6% vs. -111.4% (-94.6% late Tuesday) w/ cumulative -65.1bp at 4.663%. Fed terminal at 5.3125% in Feb'24.
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