Daily Market Color February 26, 2021Rates Reverse Course After Yesterday’s Sharp Bond Selloff Treasury yields retrace a portion of yesterday’s dramatic bond selloff Inflation concerns, vaccine developments, and fiscal aid updates remain the central themes within financial markets. Today’s rally in Treasurys pulled yields/swap rates 4-15 bps lower across the curve in a bull flattening pattern. The 10-year UST yield closed 11 bps lower at 1.40% while the 2y10y spread narrowed to 128 bps. Major US equity indices were mixed on the day – the S&P 500 and DJIA fell 0.5% and 1.5%, respectively, while the Nasdaq concluded its worst week of the past four months with a 0.5% increase. Personal income rose 10% in January after rising only 0.6% in January January’s jump was the largest monthly gain since last April, driven mainly by the distribution of $600 stimulus payments. Consumer spending subsequently rose 2.4% while the personal savings rate rose to 20.5%, the highest level since last May. The personal consumption expenditures index, the Fed’s preferred measure of inflation, was up 0.3% last month and 1.5% for the year. International goods trade deficit widens to $83.7 billion in January from $83.2 billion the month before According to the report, “Exports of goods for January were $135.2 billion, $1.9 billion more than December export,” while the “Imports of goods for January were $218.9 billion, $2.5 billion more than December imports.” $15-an-hour minimum wage removed from stimulus bill as House prepares to vote later today The $1.9 trillion bill includes $350 billion for state and local government, $1,400 for direct stimulus checks, and additional funding for the COVID-19 vaccine rollout. The minimum wage measure was removed from the bill after the Senate parliamentarian ruled that it did not comply with the reconciliation rules.
