Bond markets endured a chaotic first quarter fueled by the collapse of Silicon Valley Bank and a mixed bag of investor expectations for the direction of monetary policy, as the Federal Reserve continues to grapple with high inflation.
Andrew Kelly | Reuters
U.S. Treasury yields were higher on Monday morning as the bond market emerged from a wild first quarter.
At around 2:30 a.m. ET, the yield on the benchmark 10-year Treasury note was up by around 4 basis points to 3.5318%, while the yield on the 30-year Treasury bond added just over 2 basis points to 3.7092%. The yield on the 2-year note rose by more than 7 basis points to 4.1351%. Yields move inversely to prices.
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Bond markets endured a chaotic first quarter fueled by the collapse of Silicon Valley Bank and a mixed bag of investor expectations for the direction of monetary policy, as the Federal Reserve continues to grapple with high inflation.
Much of the focus for the second quarter will remain on the Fed’s likely monetary policy trajectory, with the central bank having indicated that interest rate hikes may be nearing their end after a 25 basis point increase in late March.
“Investors should follow the markets, not the Federal Reserve for clues on when the central bank’s rate hikes will end,” said Richard Saperstein, chief investment officer at New York-based Treasury Partners.
“While it’s possible that the Federal Reserve may hike rates by another 25 basis points, the 2-year Treasury yield has moved below the Fed funds rate, which historically signals that the Federal Reserve is near the end of its rate hiking cycle and we’re close to the peak of the Fed funds rate.”
On the economic data front, S&P Global and ISM manufacturing PMI (purchasing managers’ index) surveys are due mid-morning on Monday.
Auctions will be held Monday for $57 billion of 13-week Treasury bills and $48 billion of 26-week bills.
