Treasuries Give Back Ground Following Last Friday's Rally

After moving sharply higher in the previous session, treasuries showed a notable move back to the downside during trading on Monday.

Bond prices came under pressure in morning trading and remained firmly negative throughout the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 8.6 basis points to 3.481 percent.

The ten-year yield partly offset the 19 basis point nosedive seen last Friday, bouncing off its lowest closing level in two months.

The pullback by treasuries came as traders reacted to the latest efforts to address turmoil in the banking sector, including UBS Group’s (UBS) state-backed acquisition of Credit Suisse (CS).

U.S.-listed shares of UBS moved sharply higher following news it will acquire its troubled rival for 3 billion Swiss francs, or $3.2 billion.

The Federal Reserve also announced it has joined with other central banks around to world to take coordinated action to enhance the provision of liquidity via the standing U.S. dollar liquidity swap line arrangements.

The central banks currently offering U.S. dollar operations have agreed to increase the frequency of 7-day maturity operations from weekly to daily in order to improve the swap lines’ effectiveness in providing U.S. dollar funding.

Additionally, shares of New York Community Bank (NYCB) soared on news its subsidiary Flagstar Bank will acquire substantially all of Signature Bank’s deposits and certain loan portfolios as well as all 40 of its branches.

Traders were also looking ahead to the Fed’s monetary policy announcement on Wednesday, with CME Group’s FedWatch Tool currently indicating a 26.9 percent chance interest rates will remain unchanged and a 73.1 percent chance of a 25 basis point rate hike.

Trading activity on Tuesday is likely to be somewhat subdued as traders await the Fed’s decision, although a report on existing home sales may attract some attention.

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