- The yield on the two-year Treasury note fell to its lowest level in decades, while tech stocks recovered from last week's rout as the failure of Silicon Valley Bank reverberated across trading floors.
- In Monday's chaotic session, the two-year yield fell by more than a half-percentage point, marking the biggest three-day drop since October 1987's Black Monday, as investors poured into safe-haven assets. Some money managers have profited from what could be a Treasury short squeeze. The 10-year yield fell to a six-week low, while the dollar lost its year-to-date gains.
- The turmoil has prompted a rapid rethinking of the Fed's policy direction. Swaps traders now expect the Fed to raise interest rates by another quarter percentage point later this month. Following the collapse of SVB, Goldman Sachs economists and asset managers at Pacific Investment Management world's largest actively managed bond fund believe the Fed may take a breather on policy rates. Nomura economists went even further, predicting that the Fed will lower its target rate next week.
- The S&P 500 ended the day down 0.2%, bouncing between gains and losses amid a sell-off in bank stocks, while the policy-sensitive Nasdaq rose 0.8%, the most in over a week. As a result of SVB's failure, President Joe Biden promised stronger regulation of US lenders while assuring depositors that their money is safe.
- Janet Yellen, Treasury Secretary, stated that her office would protect "all depositors" at SVB. The government will also implement a new lending programme that, according to Fed officials, will be large enough to protect uninsured deposits in the wider US banking sector. Nonetheless, the sudden closure of New York's Signature Bank by state regulators on Sunday underscored the importance of financial system stabilisation.
- Monday's market moves come after risk assets took a beating last week, with the S&P 500 having its worst week since September. Anxiety is also high ahead of the consumer price index report on Tuesday.
