Flight-to-quality returning to earth?

  • S&P 500 up more than 4% since March 13
  • 10-year T-note has pulled back this week after 4% rally
  • Gold down more than 1% after 8.8% rally

With the caveat that tomorrow can always bring market-changing news, the flight-to-quality moves that unfolded in Treasuries and gold during the recent bank-sector turmoil have shown signs of unwinding—or at least easing—in recent days.

The chart below shows both sides of the Treasury coin—the sharp drop in the 10-year T-note yield (left) and the jump in T-note prices (right)—as news broke of the closures of Silicon Valley Bank and Signature Bank on March 10-13 and investors sought "safe havens" amid the uncertainty:

Chart 1: 10-year T-note yield index (TNX) and June 10-year T-note futures (ZNM3), 2/16/23–3/29/23. Yields up from last week’s low, prices down from high.

Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)

The 10-year T-note price has pulled back more than 1% this week (while yields have rebounded) after climbing 4% between March 9 and March 24.

Gold tells a similar story. After jumping nearly 9% from March 9–March 23, April gold futures (GCJ3) have pulled back more than 1% from last week’s high:

Chart 2: April gold (GCJ3), 2/16/23–3/29/23. Gold dips after nearly 9% rally.

Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)

But both markets are still far removed from where they were before the bank news broke—a reminder that investors may not have put the story entirely behind them, and “shocks” can reverberate in the markets even if they’re no longer in the headlines.

Today’s numbers include (all times ET): Q4 GDP, final revision (8:30 a.m.).

Today’s earnings include: Neogen (NEOG), Braze (BRZE), Skillz (SKLZ).


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