2-Year Treasury Yield Rebounds After Biggest 3-Day Slide Since 1987

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The yield on the 2-year Treasury note climbed on Tuesday, rebounding after posting its biggest three-day slide since 1987 as investors flocked to safety in the wake of Silicon Valley Bank's collapse.

The 2-year Treasury was last at 4.248% after climbing nearly 22 basis points. It had declined by close to 59 basis points on Monday, notching the biggest three-day drop since the fallout from the October 1987 stock market crash. The yield on the 10-year Treasury was last up by almost 17 basis points to 3.682%.

Yields and prices move in opposite directions and one basis point equals 0.01%.

Yields rebounded on Tuesday after shockwaves linked to Silicon Valley Bank's failure continued to reverberate through markets, having pushed investors into safer assets like government bonds. Bond yields plummeted following the bank's collapse, which sparked fears of broader issues across the banking sector.

At the same time, investors digested February's consumer price index report, which rose 0.4% for the month and in line with Dow Jones expectations, bringing the annual rate to 6% over a year ago. The report serves as one of the last major data points ahead of the Federal Reserve's next policy meeting.

In the wake of SVB's collapse and its impact on the banking sector, markets appear to be pricing in a 25 basis increase. Investors had been expecting the central bank to pick up the pace of rate hikes again and announce a 50 basis point increase at its upcoming meeting on March 21 and 22 as Fed Chairman Jerome Powell suggested last week that rates could go, and stay, higher than anticipated for longer, depending on economic data readings.

Some economists also believe that rate hikes could be paused altogether amid a string of failures in the banking sector, or that the Fed might stick to lower rate increases at its next two meetings.

 "The bond market seems to have priced the Fed out of the picture with latest developments, but in our view that is not likely," said Ethan Harris, Bank of America's global economist.

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