Treasury Yields Slip as Banking System Concerns Grow

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U.S. Treasury yields fell on Friday as investors considered what the Federal Reserve's interest rate policy expectations could mean for the economy. A slide in Deutsche Bank shares also renewed concerns over the state of the global banking system and made Treasurys more appealing.

The yield on the 10-year Treasury was down by 3 basis points to 3.374%. The 2-year Treasury yield was at 3.777% after falling by almost 3 basis points.

Yields and prices move in opposite directions and one basis point equals 0.01%.

The move comes after Deutsche Bank's credit default swaps jumped, though without an apparent catalyst, sending the stock down sharply before recovering some of its losses Friday afternoon. The move appeared to raise concerns once again over the health of the European banking industry. Earlier this month, Swiss regulators forced a UBS acquisition of rival Credit Suisse.

European Central Bank President Christine Lagarde made reassuring comments, saying euro zone banks are resilient with strong capital and liquidity positions. Lagarde also said the ECB could provide liquidity if needed.

Investors digested a week of central bank interest rate policy decisions.

Following the Fed's latest policy meeting, its chairman Jerome Powell noted that the banking crisis played a role in the central bank's decisions. On Wednesday, it announced a 25 basis point increase of interest rates and indicated that it's rate-hiking campaign could be paused soon, although its battle with inflation continues.

Many investors have long been hoping for a pause in rate hikes as concerns about whether the Fed hiking interest rates and keeping them elevated for longer would drag the U.S. economy into a recession.

St. Louis Federal Reserve President James Bullard said Friday that central bank policy should help contain cracks in the financial system.

"Continued appropriate macroprudential policy can contain financial stress, while appropriate monetary policy can continue to put downward pressure on inflation," Bullard said in a presentation.

— CNBC's Jeff Cox contributed to this report.

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