TREASURIES-Yields rise as central bank efforts to calm markets take hold

 (Adds details, updates prices)
       NEW YORK, March 20 (Reuters) - U.S. Treasury yields rose
on Monday as the takeover of Credit Suisse and central bank
steps to shore up liquidity helped allay investor concerns as
they gauge whether the Federal Reserve may  pause raising
interest rates later this week.
    Major central banks, faced with the risk of a fast-moving
loss of confidence in the stability of the financial system,
moved on Sunday to bolster cashflow around the world.
    The two-year U.S. Treasury yield, which often
moves in step with interest rate expectations, rose 7.8 basis
points to 3.924% after sliding to 3.635% in Europe.
    The two-year yield has plunged since it peaked on March 8 at
a 15-year high of 5.084% following hawkish congressional
testimony by Fed Chairman Jerome Powell.
    Days later Silicon Valley Bank failed, sparking a rout in
banking stocks and fears not only that central bank monetary
tightening would spark a recession as rising credit costs
crunched both businesses and households, but also of a global
banking crisis.
    The rise in yields suggests a massive flight to quality last
week and early in Asia has ebbed.
    "All the major central banks are behind making sure that
things turn out right," said Tom di Galoma, co-head of global
rates trading at BTIG, speaking in London.
    "Nobody has cut rates, but at the same time there's a
growing feeling amongst U.S. investors, and especially from
myself, that the Fed probably has to take a pass this week and
probably won't increase rates," said New York-based di Galoma.
    Pricing in fed funds futures have been volatile for the past
week, swinging between the odds of no hike when policymakers
conclude a two-day meeting on Wednesday, and a 25 basis point
increase. A 50 basis points rise is now seen as unlikely.
    Fed funds futures currently show a 28.4% probability of the
Fed holding its overnight rate at 4.5%-4.75%, and a 71.6%
likelihood of a 25 basis point increase, CME's FedWatch Tool
    But the market also is betting the Fed cuts rates this
summer and that by December its target rate will be 3.967%, down
from roughly 5.6% two weeks ago.
    Late on Sunday, UBS Group AG agreed to buy Credit
Suisse Group AG in a deal engineered by Swiss
authorities. UBS will pay 3 billion Swiss francs ($3.23 billion)
for its smaller rival and assume up to $5.4 billion in losses. 
    The takeover came after the 167-year-old Credit Suisse
became the biggest victim of the turmoil unleashed by SVB's
collapse, even after it received $54 billion from the Swiss
National Bank last week.
    The central banks' action on Sunday echoed steps taken to
offset the impact of the COVID-19 pandemic in 2020 and efforts
to bolster global finances after the U.S. housing market
cratered and stoked the Global Financial Crisis in 2007 to 2009.
    The yield on benchmark 10-year Treasury notes
rose 8.4 basis points to 3.481%.
    The Treasury yield curve measuring the difference between
two- and 10-year notes, which is seen as a
recession harbinger, was last at -45.1 basis points. 
    The curve's inversion last week lessened to -28.6 bps, the
narrowest spread since October, as investors quickly reduced the
rate hike scenarios this year.
    The 10-year TIPS breakeven rate was last at
2.094%, indicating the market sees inflation averaging about
2.1% a year for the next decade.
      March 20 Monday 3:00PM New York / 1900 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             4.5025       4.6147    0.156
 Six-month bills               4.595        4.7796    0.026
 Two-year note                 101-76/256   3.924     0.078
 Three-year note               102-96/256   3.7756    0.074
 Five-year note                101-240/256  3.5686    0.103
 Seven-year note               102-180/256  3.5569    0.098
 10-year note                  100-40/256   3.4809    0.084
 20-year bond                  100-144/256  3.8341    0.071
 30-year bond                  99-76/256    3.6638    0.063
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        25.00        -1.75    
 U.S. 3-year dollar swap        14.00        -0.50    
 U.S. 5-year dollar swap         8.75        -2.75    
 U.S. 10-year dollar swap        1.75        -2.00    
 U.S. 30-year dollar swap      -45.50        -2.25    
 spread (Reporting by Herbert Lash, additional reporting by Ankur
Banerjee in Singapore, Georgina Lee in Hong Kong and Karen
Brettell in New York; Editing by Simon Cameron-Moore, Chizu
Nomiyama and Richard Chang)