U.S. Treasury yields have mostly changed little, hitting overnight lows but posting weekly increases after the Federal Reserve dropped the legal relief for banks’ capital requirements, which would blur demand for Treasurys in the coming months. .
However, investors also looked at the hampered progress of vaccination efforts in Europe amid fears that the eurozone could not participate in the global economic recovery this year.
What do Treasurys do?
The ten-year treasury return TMUBMUSD10Y,
was equal to 1,729%, after trading close to 1.67% overnight, leaving the total weekly rise intact at 9.5 basis points.
The 2-year notes rate TMUBMUSD02Y,
dropped a basis point to 0.149%, leaving it virtually unchanged for the week, while the 30-year bond yield TMUBMUSD30Y,
was constant at 1,729%, leaving a weekly increase of 9.5 basis points.
What drives Treasurys?
The Federal Reserve announced on Friday that it will not terminate an exemption ending on March 31, allowing banks to exclude Treasury and deposits at the central bank from their assets when calculating a key bank capital measure, known as the supplementary leverage ratio. (SLR)
Some analysts have said that large banks would have a reduced appetite for Treasurys if they had to add it to the calculation of their capital requirements.
Read: Fed will not extend easing of core capital rules for banks
Meanwhile, Europe’s biggest drug regulator has said the vaccine against AstraZeneca is safe as several economies in the eurozone are considering lock-in measures in the wake of another spate of COVID-19 cases. This comes after several European countries suspended the use of the AstraZeneca vaccine.
The concern is that European authorities have slowly struggled to vaccinate the continent’s population, spreading the pandemic again and halting the economic recovery of the eurozone.
Sign out: European equities fall as inflation and oil demand weigh on markets
What did market participants say?
“Even if the SLR releases were phased out, the Fed’s warning that it could consider more permanent adjustments to capital requirements to support financial markets if necessary could mitigate the negative impact on Treasury returns,” said Kathy Bostjancic, chief executive. financial economist, said. by Oxford Economics.