Bond traders are quickly lowering their expectations for how much higher the Federal Reserve will raise borrowing costs — while once again fully pricing in cuts from peak levels by year’s end — as banking sector concerns grow. Are.
Pricing on swaps linked to Fed meetings moved on Friday to suggest traders now expect the central bank’s policy rate to peak at around 5.3% in July but near 5% by the end of the year – up by a quarter point. more less The target range was raised to 4.5%-4.75% on February 1.
Meanwhile, the two-year Treasury yield was on track to decline more than 20 basis points for its second-straight day. That yield fell 29 basis points to 4.58%. Its current fall of 44 basis points in two days is the biggest since 2008.
The collapse of SVB Financial, a Santa Clara, California-based bank holding company, has roiled financial markets since Thursday, raising concerns that higher interest rates are putting smaller lenders at risk.
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