Mar 14, 2023 - Economy

Short-term Treasury yields crash

Daily change in two-year Treasury note yields
Data: FDSChart; Chart: Tory Lysik/Axios Visuals

Money flooded into U.S. government bonds on Monday after the collapse of SVB and Signature Bank.

What happened: The yield on the two-year U.S. Treasury note plunged by more than half a percentage point (bond yields go down as prices go up).

  • That may not sound like much — but in the world of government bonds, moves of this magnitude are incredibly rare.
  • The last time we saw a one-day move this large was on Sept. 17, 2001, when markets first reopened — and then tumbled — after the Sept. 11 terrorist attacks.
  • Besides that, the only day that comes close is Oct. 21, 1987, in the aftermath of the stock market crash.

What it means: It's hard to say exactly — there are a lot of competing motivators at play.

  • Clearly, ongoing worries about the banking system give people plenty of reason to park some cash in Treasuries, a traditional port of call for investors during panicky periods.
  • The plunge also likely reflects expectations that the banking crisis that broke out over the last few days might mean the Fed's rate-hiking days are numbered.
  • Finally, some of the move may be driven by investors unwinding complex trades that have been upended by the market turmoil.

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