Rates Up as Banking Sector Fears Abate

Rates up on easing banking fears and Fed commentary. Yields were up across the curve today, with the 2-year closing the day up ~13bps at ~4.10% and the 10 year up ~7bps at 3.51%. The jump was partly driven by the Fed’s Waller favoring more policy tightening, which fueled further hawkish rate bets by traders, as well as an increase in bank lending activity and a slower than expected decline in core retail sales. 

U.S. Banking sector shows signs of stability. U.S. bank lending increased for the first time in three weeks and deposits increased, a positive sign for the banking sector. Commercial bank lending increased $10.2 billion based on last week’s data, and bank deposits increased ~$61 billion. C&I loans increased for the first time in three weeks, and CRE lending also improved. The gains in loans and deposits were observed across banks of all sizes.

Week ahead. Among next week’s many data releases are housing starts and existing home sales. Also look out for a continuation of bank earnings releases.