U.S. Treasury yields fell on Thursday as investors continued to weigh the current global banking strain against U.S. economic data, which continued to show resilience in the face of multiple Federal Reserve rate hikes.
The return on U.S. debt has fallen in five of the past six days. However, they barely reacted to the European Central Bank’s rate hike from 50 basis points (bps) to 3.50%, despite turmoil in financial markets.
That tension was triggered by the bankruptcy of San Francisco-based Silicon Valley Bank last week and Credit Suisse’s (SIX:CSGN). The European bank ended up borrowing up to $54 billion from Switzerland’s central bank after its stock plunge intensified fears of a global banking crisis.
This restored to some extent to investors confidence that Credit Suisse’s situation would eventually stabilize.
The yield on 10-year Treasuries fell 11 basis points to 3.384 percent, while the yield on 30-year notes fell 10.1 bps to 3.587 percent.
The yield curve deepened its inversion, with the gap between the return on two- and 10-year papers at -54.4 bps. Earlier in the week, this curve reduced its inversion as traders began to rule out some of this year’s rate hikes.
Yields on two-year U.S. debt, which typically reflect interest rate expectations, fell 5.1 basis points to 3.924%.
U.S. economic data was generally strong. Jobless claims fell more than expected, to 192,000 seasonally adjusted claims in the week ended March 11. Economists polled by Reuters had forecast 205,000 applications for the past week.
Home construction rebounded nearly 10% last month, as did building permits. However, the Philadelphia Fed’s manufacturing index fell to -23.2.
Quincy Krosby, chief global strategist at LPL Financial, in emailed comments, said the Fed “will make clear that the stability of the banking system remains strong.” “However, if there were a further deterioration within regional banks, or another blowout, the Fed might consider a pause.”