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Treasuries have erased the small overnight gains and yields are now marginally higher as bank angst continues to ebb. The 2-year yield has held above the 4% level after sliding to 4.002% overnight versus a close at 4.08% yesterday following four straight closes with a 3% handle amid the banking fears and haven demand for Treasuries. The market is also repricing for the potential for another 25 bp hike in May and is trimming bets for rate cuts, now with expectations for 60 bps in easing from over 100 bps seen two weeks ago. The 7-year is 1 bp higher at 3.625% ahead of today’s auction. The 10-year rate is up fractionally at 3.577%. The curve is holding in the -50 bp area versus a -48 bp average since March 13.
Wall Street futures are firmer, recovering from Tuesday’s small declines with the US100 up 0.84%, the US500 up 0.80% and the Dow 0.68% firmer. The VIX has edged up to 19.40 from 19.16 overnight and a recent peak of 26.5 on March 13. The USDIndex has jumped to 102.620 from a low of 102.373 with support from a pop in USDJPY to 132.405 from 130.762 earlier. JPY is losing some of its haven bid heading into quarter-end, and fiscal year-end in Japan.
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Stuart Cowell
Head Market Analyst
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