Treasury yields fell Thursday as fears of a bank crisis were reignited and investors considered whether the Federal Reserve will have to lower interest rates this year.
At 4:10 p.m. ET, the yield on the 2-year Treasury was down by more than 17 basis points to 3.764%. It declined by as many as 11 basis points on Wednesday after the Fed’s decision to lower its benchmark interest rate by 25 basis points. The 10-year Treasury was trading at 3.364% after falling by almost 4 basis points.
Yields and prices move in opposite directions. One basis point equals 0.01%.
Concerns of a banking crisis reemerged after regional bank PacWest Bancorp announced it is assessing strategic options, including a possible sale. This news comes days after JPMorgan Chase announced a takeover of First Republic, marking the third U.S. bank failure since March.
As banking shares rattle markets, investors have been looking toward bonds as a flight to safety, pushing prices higher and yields lower.
On Wednesday, the Fed announced its 10th consecutive interest rate hike and adapted its policy outlook. The 25 basis point rate increase was in line with expectations.
Central bank officials also indicated that rate hikes could be halted soon as they cut wording that had indicated additional tightening likely would be necessary to bring inflation down out of their policy guidance.
In a press conference, Fed Chairman Jerome Powell noted that the removal was a “meaningful” shift, but that policy decisions would continue to be data dependent. He added that there was “a long way to go” before inflation returns to its 2% target and that it may be too soon for rate cuts.
That fueled concerns about the impact elevated rates may have on the economy and whether a recession is on the horizon.
On Thursday, fresh balance of trades figures for March and initial weekly jobless claims data are expected.
The European Central Bank announced its latest interest rate decision Thursday by 25 basis points, as was widely expected. .
Correction: The 2-year Treasury note yield fell by 21.1 basis points at one point. A previous version misstated the move.
