Daily Market Color February 17, 2022Ukraine Fears Flare Up, Pull 10-Year Back Below 2% Ukraine jitters pull swap rates and yields lower. Speaking at the White House today, President Joe Biden clarified that there remained a “very high risk” of a Russian invasion, contradicting reports of a troop withdrawal from the Ukrainian border. Risk assets promptly dropped, the S&P 500 closing down 2.1% while haven assets like Treasurys and gold rose. Swap rates and Treasury yields would end the day 6-9 basis points lower across the curve, the 10-year Treasury yield closing below 2% at 1.96%. Across the pond, ECB prepares for policy tightening. Stubbornly high inflation is not just a U.S. phenomenon, in Europe the ECB is also preparing to target runaway prices with policy tightening. Philip Lane, the Chief Economist of the ECB, confirmed as much, saying that he doesn’t expect inflation to fall below the bank’s 2% target for another two years. A ECB consensus around tightening has been built very quickly, and the market is already pricing in 4 rate hikes through the end of 2022. Day ahead. Tomorrow will be a light day data-wise, with existing home sales and the conference board’s leading index the only two data releases scheduled to occur.
