Treasuries Show Substantial Move Back To The Upside
After coming under pressure over the course of the previous session, treasuries showed a substantial move back to the upside during trading on Friday.
Bond prices moved sharply higher in morning trading and remained firmly positive throughout the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, plunged by 19 basis points to 3.395 percent.
The ten-year yield more than offset the 9.3 basis points jump seen on Thursday, ending the session at a two-month closing low.
The rally by treasuries came as traders once again look to relative safety of bonds amid a sharp pullback by stocks on Wall Street.
Stocks came under pressure amid lingering concerns about turmoil in the financial sector, with shares of First Republic Bank (FRC) plunging by 31.1 percent after surging by 10.0 percent on Thursday.
The jump in the previous session came as a group of financial institutions agreed to deposit $30 billion in First Republic in an effort to express confidence in the banking system.
Meanwhile, bond traders continued to look ahead to the Federal Reserve’s monetary policy announcement next Wednesday.
CME Group’s FedWatch tool currently indicates a 34.3 percent chance the Fed will leave rates unchanged and a 65.7 percent chance of a 25 basis point rate hike.
In U.S. economic news, the Federal Reserve released a report showing U.S. industrial production was unexpectedly unchanged in the month of February.
The Fed said industrial production was unchanged in February following a revised 0.3 percent increase in January. Economists had expected industrial production to rise by 0.2 percent compared to the unchanged reading originally reported for the previous month.
A separate report from the University of Michigan showed consumer sentiment in the U.S. fell for the first time in four months in March.
The report said the consumer sentiment index slid to 63.4 in March from 67.0 in February. Economists had expected the index to be unchanged.
Surveys of Consumers Director Joanne Hsu noted the decrease was already fully realized prior to the failure of Silicon Valley Bank.
The report also showed decreases in both near-term and long-term inflation expectations, with year-ahead inflation expectations falling to the lowest level since April 2021.
The Fed’s interest rate decision is likely to be in the spotlight next week, overshadowing reports on new and existing home sales and durable goods orders.
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