Market Extra: Two-year Treasury yields see biggest monthly drop since 2008 after bank turmoil

by | Mar 31, 2023 | Stock Market

U.S. Treasury yields tumbled in March as banking-sector woes roiled markets, with two-year rates seeing their biggest monthly drop since 2008. The yield on the two-year Treasury note finished Friday at 4.060%, falling 73.5 basis points in March for its biggest monthly decline since January 2008 based on 3 p.m. Eastern time levels, according to Dow Jones Market Data. 

Two-year Treasurys “rallied unimaginable amounts in the middle of the month,” said Michael Kushma, chief investment officer of broad markets fixed income at Morgan Stanley Investment Management, in a phone interview. Around mid-March, the Federal Reserve announced an emergency bank term funding program after the sudden collapse of California’s Silicon Valley Bank and New York’s Signature Bank. The run on Silicon Valley Bank had sparked contagion fears, prompting the Fed to create a new program to help banks meet the needs of their depositors and shore up confidence in the banking system. Treasury yields sank amid the regional banking tumult, with investors questioning whether the Fed would keep hiking interest rate hikes to battle high inflation. As financial stability concerns rose, traders in the fed-funds futures market began betting on potential rate cuts later th …

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