Treasury Yields Rebound

Treasury yields rebounded after the deal for deposits and assets of Silicon Valley Bank. The yield on the benchmark 10-Year U.S. Treasury Note rose 9 basis points from 3.38% to 3.47% as fears of a global banking crisis were easing. The yield on the 2-year T-note gained 26 basis points from 3.78% to 4.04%. Fed funds futures closed above 95 (May 2023: 95.055), suggesting most of the Fed’s interest rate hikes are in the rearview mirror as US central bankers have already brought the benchmark borrowing rate to a new 4.75-5% target range in March. Against a backdrop of less volatile bond markets, the Fed shrank its balance sheet by $28 billion from 21 to 28 March.

In Europe, the yield on the German 10-year Bund rose 16 basis points week-over-week, from 2.13% to 2.29%, while the French OAT yield with the same maturity added 15 basis points from 2.65% to 2.80%.

Investment grade corporate bond prices were down 0.16% in Europe (IBOXX € Liquid Corporates index up 2.19% year-to-date) and up +0.25% in the U.S. (IBOXX Ishares $ Investment Grade Corporate Bond Index up 3.46% year-to-date).

High-yield bonds gained +0.87% in Europe (IBOXX € Liquid High Yield Index up 2.98% year-to-date) and +1.93% in the U.S. (Markit iBoxx USD Liquid High Yield Capped Index up 3.07% year-to-date).

Emerging debt in local currencies chalked up a 1.52% gain (+5.06% year-to-date) while the dollar index slid 0.47% below 102.30.