US Treasury yields almost ended with little change on Friday, recovering from overnight lows, but recorded weekly increases after the Federal Reserve allowed regulatory relief for banks’ capital requirements to expire, feeding concerns that demand for Treasury bills could decline in the coming months.
However, investors also noted the stunted progress of vaccination efforts in Europe amid fears that the eurozone will be unable to participate in the global economic recovery this year.
What are Treasures doing?
The yield of the 10-year Treasury note TMUBMUSD10Y,
remained stable at 1.729%, after trading close to 1.67% overnight, still leaving its overall weekly increase intact at 9.5 basis points.
The 2-year banknote rate TMUBMUSD02Y,
dropped a base point to 0.149%, leaving it virtually unchanged during the week, while the yield on the 30-year title TMUBMUSD30Y,
remained stable at 1.729%, resulting in a weekly increase of 9.5 basis points.
What is motivating the Treasurys?
The Federal Reserve announced on Friday that it will not extend an exemption ending March 31 that allows banks to exclude Treasury bills and deposits with the central bank from their assets when calculating a key measure of the bank’s capital known as the leverage ratio. additional. (SLR)
Some analysts said that large banks would have a reduced appetite for Treasury bills if they had to add them back to the calculation of their capital needs.
Reading: Fed will not extend relief to banks from key capital rule
Meanwhile, Europe’s top drug regulator said the AstraZeneca vaccine was safe, as several eurozone economies are considering blocking measures in the face of another wave of COVID-19 cases. This happened after several European countries suspended the use of the AstraZeneca vaccine.
The concern is that European authorities have been slow to inoculate the population of the continent, allowing the pandemic to spread again and block the eurozone’s economic recovery.
Check out: European stocks fall with inflation and demand for oil weighing on markets
What did market participants say?
“Although SLR exemptions have been set to be phased out, the Fed’s warning that it could contemplate more permanent adjustments to capital requirements to support financial markets, if necessary, could help“ mitigate the adverse impact on earnings. Treasury, ”said Kathy Bostjancic, chief economist in the financial sector at Oxford Economics.