March 20, 2023 16:26 GMT
Market Roundup: 2Y Leads Sell-Off While Mid-Year Rate Cut Persists
- Front month Treasury futures are trading near midmorning lows heading into midday, well off overnight highs tapped during early London trade with markets apparently fading various Central Bank efforts to stem regional bank panic.
- Risk improved briefly after liquidity operations through standing U.S. dollar liquidity swap line arrangements, and UBS's $3.25B takeover of Credit Suisse while the Swiss National Bank, both announced Sunday.
- Questions over credit risk remain after CS' AT1 bond rout with holders of $17B debt taking the loss in full. A distracting narrative ahead of this Wednesday's FOMC policy announcement, the collapse of Silicone Valley Bank and Signature Bank over a week ago continues to weigh on regional banks (FRC -26%).
- While the collapse in financial share has loosened policy expectations from how many 50bp rate hikes by year end, to how soon will the Fed cut rates (implied pricing targeting July this morning), short end rates are currently swinging lower (2Y yield currently 3.9177% +.0803), yield curves bear flattening amid ongoing wide ranges: 2s10s tapped -53.105 low recently, appr 12bp flatter at midday.