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Treasuries Gain From Asian Open as SVB Damps Hawkish Fed Bets

(Bloomberg) -- Short-end Treasuries climbed as trading got underway in Asia as the collapse of Silicon Valley Bank tempered bets for more aggressive US rate hikes.

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Benchmark two-year yields slid as much as 15 basis points to 4.44% after tumbling 27 basis points last week. US financial regulators moved on Sunday to protect depositors’ funds following the collapse of Silicon Valley and set up a new financial backstop.

“Markets have seen fresh and reassuring comments from US officials, relating to the SVB situation,” said Andrew Ticehurst, strategist at Nomura Holdings Inc. in Sydney. “Despite this, the US bond market is continuing to reprice lower expectations regarding future Fed tightening.”

Overnight indexed swaps are currently pricing in a peak US rate of almost 5.20% in June.

The Fed, Treasury Department and Federal Deposit Insurance Corp. are taking steps to shore up confidence in the banking system after SVB’s failure spurred contagion concerns. SVB’s collapse into FDIC receivership — the second-largest US bank failure in history behind Washington Mutual in 2008 — came suddenly on Friday, after a couple of days where its long-established customer base of tech startups yanked deposits.

--With assistance from Joanna Ossinger.

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