US Treasury yields fell on Wednesday as troubles at Swiss banking giant Credit Suisse fueled fears of the impact of a rising cost of credit on the global banking sector.
US data showing signs of economic weakness and cooling inflation also contributed to the falls.
The yield on two-year debt, which tends to move in step with interest rate expectations, fell 23.8 basis points to 3.989 percent. In the last two weeks, the two-year return has fallen more than 130 basis points.
The return of the referential 10-year notes fell 14.4 basis points, to 3.49%, and that of the 30-year paper yielded 7 basis points, to 3.69 percent.
A closely watched part of the yield curve, which measures the spread between 2-year and 10-year bond returns and is considered an indicator of economic expectations, contracted to -28.6 basis points.
Credit Suisse grabbed the market’s attention on Wednesday after the failure of Silicon Valley Bank last week, renewing concerns of a banking crisis.
Switzerland is under pressure from at least one major government to intervene quickly in Credit Suisse after the Swiss bank sent European bank shares tumbling on Wednesday.
Swiss authorities and European lenders are reportedly discussing ways to stabilize the bank, according to Bloomberg News, citing people familiar with the matter.
“The odds of a (rate) hike next week have dropped substantially, and that’s due to the turnaround in risk aversion,” said Zachary Griffiths, senior investment grade strategist at CreditSights.
“The risk-off tone in the broader market has a lot to do with the US regional banking sector, and Credit Suisse has been the one driving the moves,” he added.
The Commerce Department announced Wednesday that retail sales fell 0.4% last month. Data for January was revised up to show an increase of 3.2%, instead of the previously announced 3%. Economists polled by Reuters had expected a decline of 0.3 percent.
The Producer Price Index published by the Labor Department fell 0.1% in February, from a revised 0.3% rise in January, much cooler than the expected 0.3% monthly increase.
