2-Year Treasury Yield Rises Back Above 4%, Recovering From Bank Crisis Dip

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U.S Treasury yields climbed on Tuesday as fears of a crisis in the banking sector were assuaged and investors assessed what could be on the horizon for the U.S. economy and Federal reserve policy decisions.

The yield on the 10-year Treasury was trading at 3.547% after rising more than 1 basis point. The yield on the 2-year Treasury was nearly 8 basis points higher at 4.041%.

Yields and prices move in opposite directions and one basis point equals 0.01%.

Investors considered the outlook for the economy as fears about a widespread banking crisis eased.

Federal Reserve Governor Michael Barr on Monday released remarks about the banking sector turmoil, which he will present to two congressional panels on Tuesday and Wednesday. In the comments, Barr referred to Silicon Valley Bank's failure as a "textbook case of mismanagement" and noted that the Fed would investigate its processes around risk testing and assessment.

Fed officials have indicated that they considered the turmoil before deciding to hike interest rates by 25 basis points last week and hinted that rate increases could be paused soon. However, the central bank's battle against inflation is not yet over, its Chairman Jerome Powell said.

Hiking interest rates has been one of the key policy tools used by the Fed to cool the economy and ease inflationary pressures. Many investors have been concerned about whether the pace of rate hikes and keeping rates higher for longer could drag the U.S. economy into a recession.

Fresh hints about the state of the economy and policy plans are expected from Fed speakers throughout the week and the release of the latest personal consumption expenditures price index on Friday.

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