Yields Fall While Yellen Mulls Expanded Deposit Protection

Swap rates, Treasury yields fall again. The rally at the short end of the Treasury curve continued following yesterday’s FOMC meeting, with the 2-year yield falling over 10bps to 3.83% and the 10-year yield staying nearly neutral at 3.43%. A new home sales miss partially contributed to the rally, as the level came in at 640k, which was lower than the forecast of 650k. The move also came after Treasury Secretary Janet Yellen commented on the potential for continued deposit backstops, as the stability of the banking sector continues to be at the forefront of discussion.

Secretary Yellen’s language today signals broader bank deposit protection is on the table. Secretary Yellen’s comments to the House Appropriations Committee today included a signal that deposit protection could be extended above $250,000, in-line with the move taken to protect SVB depositors. In her prepared remarks, she said that the government’s recent actions were “taken to ensure that Americans’ deposits are safe,” and added, “Certainly, we would be prepared to take additional actions if warranted.” The comment follows her remarks to the Senate yesterday, where she said that Treasury officials had not yet considered temporarily expanding the scope of deposit insurance to all bank deposits. A broad expansion would require Congressional approval; however, regulators can rescue depositors on a case-by-case basis in extreme situations. These comments come as money market account balances hit a record high this week.  

Day ahead. St. Louis Fed President James Bullard will make public comments at 9:30 AM ET. Durable goods order data will lead the session at 8:30 AM, which will be followed by PMI releases at 9:45 AM.