Banking Crisis Causes US Treasury Yields and Market Volatility
By As the markets continue to adjust to the recent banking crisis, the U.S. 10-Year Treasury yield decreased to 3.41%, while the Two-Year Treasury yield hovers around 3.84%, resulting in a spread of -43 basis points. The 10-year Treasury yield decreased by 0.074 percentage points, settling at 3.56%. There were huge swings each day, with the 10-year yield diving 30 basis points to 3.395%, and the two-year yield crashing 74 basis points to 3.85% – the biggest weekly drop since 1987. The 10-year Treasury yield fell 7 basis points to 3.42%, and skidded 14 basis points to 3.49%, hitting 3.39%, not far from the Feb. 2 low of 3.33%. The 2-year Treasury yield dived 25 basis points to 3.97%.
The Dow Industrial Average fell more than 500 points, which amounts to a 1.3% decline, while the S&P 500 and Nasdaq each fell about 1.5%.[0] The Russell 2000, a small-cap index, dropped 2.7% after plummeting 8% during the previous week[1] On Wednesday, the Dow Industrial Average retreated 0.9%, and the S&P 500 index shed 0.7%.[1] The Nasdaq composite rose less than 0.1%, while the small-cap Russell 2000 tumbled 1.7%.[1]
Today, the CME FedWatch Tool now expects a 83% chance of a 25-basis-point rate hike at the March meeting, with nearly 17% expecting no change in rates.[2] Nearly 78% expect a quarter-point rate hike at the upcoming meeting and 23% expect a pause in May. It is anticipated by markets that there will be several rate reductions, with a decrease of 50 points in June.[1]
President Biden has assured Americans that the nation's banking system is secure after the fallout. He said “Americans can have confidence that the banking system is safe. Your deposits are safe. No losses will be borne by the taxpayer.”
In early trading, Credit Suisse's stock plummeted by over 26% when a major investor announced they would not be able to give any additional funds to the Swiss financial institution.[3] On Thursday, stocks experienced an upsurge in response to the announcement that major financial institutions such as JPMorgan and Bank of America were planning to provide First Republic with financial aid, essentially providing a lifeline for the bank in crisis.[4]
0. “U.S. stocks drop on worries about Credit Suisse, global banking” NPR, 16 Mar. 2023, https://www.npr.org/2023/03/15/1163640413/credit-suiss-banks-silicon-valley-bank-signature-bank
1. “Tech Futures Rise After Nasdaq Ekes Out Gain; 6 Giants Stand Tall” Investor's Business Daily, 16 Mar. 2023, https://www.investors.com/market-trend/stock-market-today/dow-jones-futures-nasdaq-ekes-out-gain-microsoft-giants-stand-tall/
2. “Stock Market Today: Markets Rise as Bank Stocks Bounce” Kiplinger's Personal Finance, 14 Mar. 2023, https://www.kiplinger.com/investing/stocks/stock-market-today-markets-rise-as-bank-stocks-bounce
3. “Europe's banking stocks suffer biggest drop in a year” CNN, 14 Mar. 2023, https://www.cnn.com/2023/03/13/investing/european-banks-svb-collapse/index.html
4. “Stock market news today: Stocks slide Friday to cap hectic week of trading” Yahoo News, 17 Mar. 2023, https://news.yahoo.com/stock-market-news-today-march-17-2023-123151709.html
