US yields could bounce back to 4% as SVB rescue haven trade reverses

Photo of author

(Bloomberg) — US 10-year Treasury yields could slide back to 4% as government efforts to eliminate contagion risks from the collapse of Silicon Valley Bank dampen demand for the haven asset.

Read the most from Bloomberg

That is the view of Mitsubishi UFJ Morgan Stanley Securities Co and RBC Capital Markets, who see a risk that US sovereign debt will give up its biggest two-day gain since the start of the pandemic after authorities guaranteed access to SVB deposits. Was. US inflation data due on Tuesday could send traders into another frenzy if prices rise faster than expected, creating selling pressure on Treasuries.

“Four per cent is possible this week if fears in the banking sector ease and US data is strong,” Alvin Tan, RBC strategist in Singapore, said of the 10-year yield. “The only certainty is that volatility will remain high.”

Even uncertainty loomed over the Fed’s rate outlook after the failure of the second largest US bank in history late last week. Ten-year Treasury yields fell nearly 30 basis points in two days to settle at 3.70% on Friday, before swinging between 3.66% and 3.76% Monday.

Read more: Goldman sees no Fed hike in March amid SVB decline

“The US authorities have taken increasingly bold steps to ensure that nothing unexpected will happen,” said Kenta Inoue, senior bond strategist at MUFG in Tokyo. He added that the two-year yield could also rebound to 5% as investors bet that “the collapse of SVB will not create systemic risk and will not lead to a financial crisis.”

See also  Shares making the most important strikes noon: Chevron, Tesla, Seagate Era, United Leases and extra

Read the most from Bloomberg Businessweek

©2023 Bloomberg L.P.