Extended Flight to Safety Gains
INTEREST RATE MARKET FUTURES
In a flight to safety move, futures are higher across the board in light of concerns over the health of the banking sector. Big international banks are also being adversely affected.
Government bond yields around the world extended declines on Monday. U.S. Treasury two-year yields plunged to 4.10% as traders dialed back Federal Reserve rate hike prospects.
A week ago the Federal Reserve was on track for a 50 basis point hike at the March 22 policy meeting. However, there has been a shift in expectations. Financial futures markets are now suggesting there is a significant chance the central bank may make no change to interest rates in March or possibly only a 25 basis point increase.
The technicals and fundamental for the June 30-year Treasury bond futures have become more supportive in the past seven trading sessions.
STOCK INDEX FUTURES
Stock index futures were higher in the overnight trade on news that U.S. regulators moved this weekend to limit the impact of the collapse of a large west coast bank and a New York bank. Regulators announced plans to backstop depositors and provide a new lending program to financial institutions. The move helped to shore up wavering confidence in the banking system.
However, futures are now lower on the belief that more needs to be done.
The U.S. dollar weakened against all major currencies as the Federal Reserve’s move to support the banking system raised questions about the pace of future interest rate increases. There is speculation that the Federal Reserve could take a less aggressive approach to policy tightening to avoid further risks to the financial system.
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