U.S. Treasury yields mostly ended little changed Friday, bouncing off overnight lows, but booked weekly increases after the Federal Reserve allowed regulatory relief for banks capital requirements to expire, fueling concerns demand for Treasurys could fade in the coming months.However, Investors also eyed the stunted progress of vaccination efforts in Europe amid fears the eurozone will be unable to share in the global economic recovery this year. The 10-year Treasury note yield
was flat at 1.729%, after trading near 1.67% overnight, still leaving its overall weekly rise intact at 9.5 basis points. The 2-year note rate
was down a basis point to 0.149%, leaving it virtually unchanged for the week, while the 30-year bond yield
was steady at 1.729%, leaving it with a 9.5 basis point weekly rise.
Whats driving Treasurys?
The Federal Reserve on Friday announced it will not extend an exemption ending March 31 that allowed banks to exclude Treasurys and deposits with the central bank from their assets when calculating a key bank capital measure known as the supplementary leverage ratio. (SLR)
Some analysts said that big banks would have a reduced appetite for Treasurys if they had to add them back to the calculation of their capital requirements.
Read: Fed wont extend relief for banks from key capital rule
Meanwhile, Europes top drug regulator said the AstraZeneca vaccine was safe as several eurozone economies contemplate lockdown measures in the face of another wave of COVID-19 cases. This comes after several European countries suspended use of the AstraZeneca vaccine.
The concern is European authorities have been slow at inoculating the continents population, allowing the pandemic to spread anew and stymie the eurozones economic recovery.
Check out: European stocks fall as inflation and oil demand weigh on markets
What did market participants say?
Though the SLR exemptions were set to be phased out, the Feds caveat that it could contemplate more permanent tweaks to capital requirements to support financial markets if necessary could help soften the adverse impact on Treasury yields, said Kathy Bostjancic, chief financial economist at Oxford Economics.