Treasuries Extend Pullback Amid Easing Banking Concerns

Treasuries moved sharply lower over the course of the trading day on Tuesday, extending the pullback seen in the previous session.

Bond prices came under pressure early in the session and saw further downside as the day progressed. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 12.5 basis points to 3.606 percent.

The ten-year yield added to the 8.6 basis point advance seen on Monday, climbing further off last Friday’s two-month closing low.

The continued weakness among treasuries came as easing concerns about turmoil in the financial sector further reduced bonds’ safe-haven appeal.

Traders were also reacting to remarks by Treasury Secretary Janet Yellen, who said the government is prepared to once again take action to protect bank depositors if smaller lenders are threatened.

In remarks prepared to the American Bankers Association, Yellen addressed recent steps taken to protect depositors following the failures of Silicon Valley Bank and Signature Bank.

“The steps we took were not focused on aiding specific banks or classes of banks. Our intervention was necessary to protect the broader U.S. banking system,” Yellen said.

She continued, “And similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.”

Meanwhile, traders continued to look ahead to the Federal Reserve’s highly anticipated monetary policy announcement on Wednesday.

While the recent banking turmoil led to some speculation the Fed may leave interest rates unchanged, CME Group’s FedWatch Tool is currently indicating an 83.4 percent chance of a 25 basis point rate hike.

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