Market comment

US Treasuries rally as Fed’s hawkish language dialled down

DAVY VIEW

US Treasury markets rallied yesterday (March 22nd) after the Fed’s decision to raise rates by 25bps. Investors focused on signs in the Fed’s statement that the rate tightening cycle is coming to an end, reinforced by Jay Powell’s acknowledgement that the fallout from the collapse of Silicon Valley Bank (SVB) will tighten credit conditions. Markets ignored Powell’s assertion that the Fed does not see rates being cut this year. Options prices now see less than a 50% probability of a further hike in May, with the OIS curve implying rates will fall to 4.1% by end-2023.

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Mar 23 2023, 08:15 GMT

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