S&P 500 Futures, US Treasury bond yields dribble as Fed-linked caution pokes receding banking sector fears

• Market sentiment remains sidelined during a sluggish start to the key week.
• S&P 500 Futures seesaw around fortnight high, struggle to extend two-day uptrend.
• US 10-year, two-year Treasury bond yields fade previous rebound from six-month low.
• Anxiety about Fed’s next move contrasts with risk-positive headlines from banking sector to limit moves on important day.

Global traders aptly portray the market’s anxiety ahead of the all-important Federal Open Market Committee (FOMC) monetary policy meeting on early Wednesday. In doing so, the market players struggle to justify the latest headlines suggesting the easing fears from the banking sector.

While portraying the mood, S&P 500 Futures remain lackluster around 4,040 despite upbeat Wall Street closing while benchmark US Treasury bond yields struggle to extend a two-day rebound from the lowest levels since September 2022. That said, the US 10-year and two-year Treasury bond yields mark a one basis point of downside near 3.60% and 4.18% respectively by the press time.

The pre-Fed caution becomes more important this time as the US policymakers are trying hard to push back the fears of the 2008 crisis. Also highlighting today’s FOMC are the recently mixed US data and the market’s hawkish calls of witnessing 0.25% rate hike. It should be noted, however, that major attention is on the developments in the Fed’s dot plot and Fed Chairman Jerome Powell’s speech.

Elsewhere, traders witness mixed headlines late Tuesday, after an initial round of optimistic news that favored the US Treasury bond yield and Wall Street. Among them is the news that the US policymakers are discussing ways to surpass Congress to defend the banks and chatters that the First Republic Bank eyes the government’s help and pokes investors.

Previously, US Treasury Secretary Janet Yellen’s comments gained major attention as she said, "Treasury, Fed, FDIC actions reduced risk of further bank failures that would have imposed losses on deposit insurance fund."  Earlier on Tuesday, Bloomberg shared the news stating that the “US officials are studying ways they might temporarily expand Federal Deposit Insurance Corporation (FDIC) coverage to all deposits, a move sought by a coalition of banks arguing that it’s needed to head off a potential financial crisis.” Apart from the US policymakers, European Central Bank (ECB) Official Martins Kazaks and Dr. Marcel Rohner, Switzerland’s Banking Association Chairman also tried to convince the markets that their respective banking system isn’t on the brink of collapse.

On a different page, Reuters came out with the news suggesting geopolitical challenges to the global economy due to China President Xi Jinping’s visit to Russia, which in turn should have probed the risk-on mood. The news also quotes the joint statement accusing the West by mentioning that the United States was undermining global stability and NATO barging into the Asia-Pacific region.

Looking forward, the UK inflation numbers and a speech from ECB President Christine Lagarde can entertain market players ahead of the key Fed announcements.

Also read: Forex Today: Market sentiment improves ahead of the Fed, DXY resists