No. of Recommendations: 5
The yield on the Treasury Five Year Bond has dropped like a rock from a recent peak of 4.35% March 9th down to 3.6% this morning, as market participants run to safety and drive up bond prices. Ten and thirty year bond yields are also down recently, though not as dramatically.
News reports indicate that market participants and observers have changed what they expect the Fed to do next week due to the fears of contagion in the banking sector: prior to the collapse of Silicon Valley Bank and abrupt closure of Signature Bank expectations were that a 1/2 point raise was likely due to the persistent economic strength and inflation observed recently in the US, but now few think the Fed will raise 1/2 point, and opinions are split whether they'll raise 1/4 point or leave the Fed rate unchanged.
So far, from what I can see, there's not much reason to worry of a wider banking crisis, but I suppose I wouldn't know at this point if the issues causing the failures of SVB and SB were more widespread than is currently reported in the news. Those issues being: excess investment in long term Treasury bonds by SVB, leaving them strapped for cash with the value of their assets diminished by rising market rates, and high exposure to cryptocurrency assets for SB, many of which have withered in value this year, combined with a panic run caused by the SVB collapse.
