Risk On Attitude Rings in the New Year

Swap rates and yields sell-off to ring in the new year. Investors started the year in a risk-on mood with equities hitting record highs and rates significantly increasing across a steepening curve. The S&P picked up where it left off and closed on a new record high with Apple crossing $3 trillion in market value – the first US company to reach that mark. The 2-year U.S. Treasury yield crossed 80 bps briefly this morning before closing at 77 bps, while The 10-year U.S. Treasury yield closed at its highest mark since the onset of the omicron variant, increasing 12 bps on the day to close at 1.63%.

Loan growth rebounded during the second half of 2021, loans to deposits still at a historical low. After a bleak start to 2021 loan growth for U.S. lenders, the second half of 2021 proved to be a turning of the tide for lending at both large and small U.S. banks. Fourth-quarter annualized growth for C&I at large U.S. banks is currently 21.05%, while commercial real estate (CRE) quarter-to-date annualized growth is 9.60% for small U.S. banks. However, with a week remaining in the 2021 data, loan to deposits still sits at a historical low of 58.9% for U.S. banks.

Oil surges ahead of Tuesday’s OPEC meeting. As inflation is at the top of investors’ minds heading into 2022, inflationary pressures got an early boost as oil futures increased over 1.0% on the day topping $76 a barrel as OPEC cut its surplus estimate for the first quarter of 2022. The cut was primarily attributed to an expected decrease in Libyan output due to a damaged pipeline within the country. Analysts expect demand to hit all-time highs in 2022.