March 20, 2023 19:41 GMT
Yield Climb Amid Unwinds Ahead Wed's FOMC
- Front month Treasury futures are trading near session lows after the bell. maintaining a relatively narrow range in the second half. Treasuries had traded moderately firmer in early London trade, unwinding support amid various Central Bank efforts to stem regional bank panic.
- Risk improved briefly after liquidity operations via standing U.S. dollar liquidity swap line arrangements announced Sunday, while the SNB also announced UBS's $3.25B takeover of Credit Suisse.
- Concerns over credit risk remained 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 -40%).
- While the collapse in financial shares over the past week have 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 traded lower (2Y yield currently 3.9177% +.0803), yield curves bear flattened amid ongoing wide ranges: 2s10s tapped -53.105 low earlier, vs. -33.080 overnight.