Prospects for the US stock and bond markets.
2023-03-31
■US stock market authorities' response to bank deposit protection is uncertain
■The decline of US treasury bond yield slowed down
The S&P 500 continued to rise, with the Dow Jones Industrial Average rebounding. The market rose earlier this week after a merger agreement with major Swiss financial institutions eased concerns about the instability of the financial system. However, the Federal Open Market Committee (FOMC) decided to raise interest rates by 25 bp, raising concerns about economic deterioration and putting pressure on stock prices. US Treasury Secretary Janet Yellen has repeatedly changed her view on bank deposit protection, and stock prices continue to fluctuate nervously.
The Banking Committee of the United States Senate and the Financial Services Committee of the House of Representatives held public hearings on the 28th and 29th to discuss the recent bank failures and the response measures of federal regulators. US Treasury Secretary Yellen convened the US Financial Stability Oversight Committee (FSOC) over the weekend to emphasize the soundness of the US banking system.
The 10-year treasury bond continued to rise (yields fell). In the first half of the week, the speculation that the Federal Open Market Committee (FOMC) would not raise interest rates subsided, and the yield of US 10-year treasury bonds rose. As expected, the FOMC decided to raise interest rates by 0.25%, but the revision of the statement suggested that the pause in interest rate increases was approaching. After the FOMC, US bond yields strengthened the downward trend.
As concerns about the financial system remain unresolved, FOMC is increasingly digesting expectations of suspending interest rate hikes and cuts in the second half of the year. The passive demand for US treasury bonds at the end of the month and quarter is also expected, and the supply and demand situation should encourage the yield to decline. However, as of last week, significant interest rate cuts were considered, and the pace of decline is expected to slow.