After moving sharply higher over the past few sessions, treasuries showed a substantial pullback during trading on Monday.
Bond prices showed a steep drop at the start of trading and saw some further downside as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, surged 14.8 basis points to 3.528 percent.
The sharp pullback by treasuries came as fears of a global banking crisis once again eased following the latest developments in the sector.
Shares of First Citizens BancShares (FCNCA) skyrocketed on Wall Street after the company an agreement with the FDIC to purchase substantially all deposits and loans of failed Silicon Valley Bridge Bank.
The FDIC said the transaction included the purchase of about $72 billion of Silicon Valley Bridge Bank’s assets at a discount of $16.5 billion.
U.S.-listed shares of Deutsche Bank (DB) also showed a strong move back to the upside after German Chancellor Olaf Scholz noted the bank remains profitable and said there’s no reason to doubt its future.
Additionally, a report from Bloomberg said U.S. authorities are considering expanding an emergency lending facility for banks in ways that would give First Republic Bank (FRC) more time to shore up its balance sheet.
Officials have yet to decide on what support they could provide First Republic and an expansion of the Federal Reserve’s offering is one of several options being weighed at this early stage, Bloomberg said, citing people with knowledge of the situation.
However, the pullback by treasuries may have been exaggerated by light volume, with a lack of major U.S. economic data keeping some traders on the sidelines.
Later in the week, traders are likely to keep a close eye on a report on personal income and spending in the month of February, as it includes a reading on inflation said to be preferred by the Federal Reserve.
With the Fed signaling last week that it expects just one more interest rate increase this year, traders will look to the data for clues about the timing of the final rate hike.
Developments in the banking sector are likely to remain in focus on Tuesday, while traders are also likely to keep an eye on a report on consumer confidence.
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