Biggest Plunge in Bond Yields Since Volcker Era on Bank Fears
- Two-year note’s yield, above 5% last week, drops below 4%
- Odds of another hike fall below 50% and cuts are priced in
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The shift in short-term interest rate markets Monday was unlike almost anything seen for more than four decades, including even the 2008 financial crisis and the aftermath of the Sept. 11 terror attacks.
The one-day drop in two-year yields was the biggest since the Volcker era in the early 1980s and surpassed the period surrounding the Black Monday stock-market crash of 1987. At one stage they plummeted as much as 65 basis points to 3.935%, before moving to be down around 61 basis points. The moves came as traders radically rethought their expectations for Federal Reserve monetary policy in the wake of several bank failures and the rollout of a new government backstop facility.