Daily Market Color

Benchmark 10-Year Breaches 1% Threshold for First Time in 2021

10-year dips below 1% during intraday trading
Vaccine shortages remain a concern for markets, especially after today’s FOMC statement raised concerns that an economic recovery could be slowed by issues with vaccine distribution.  Major US equity indices closed lower on the day – the S&P 500 and DJIA falling 2.6% and 2.1%.  The benchmark 10-year UST yield briefly fell below the 1% threshold earlier today but ultimately closed at 1.01%.
FOMC votes unanimously to leave benchmark rate unchanged at 0.00 – 0.25%
In their first meeting of the year, the Fed pledged to continue purchasing $120 billion worth of MBS and Treasurys monthly until there has been “substantial further progress” towards its dual mandate.  The announcement detailed the economic recovery is dependent on the vaccine spread and pace of the rollout, but Fed Chair Jerome Powell added, “The pandemic still provides considerable downside risks to the economy.”  The full FOMC statement can be found here.
New orders for durable goods rose only 0.2% in December after growing 1.2% the month before
The level fell below forecasts, as economists were expecting a ~1% rise.  Despite the sluggish growth, demand has grown consistently for the past eight months.  Economic data continues to show the manufacturing industry has rebounded from its pandemic lows, with last week’s IHS Markit business activity index rising to its highest level in a decade.
IMF upgrades 2021 global growth forecast to 5.5%
The IMF lender cites the rollouts of COVID-19 vaccines as the main driver for growth this year but believes the “inequitable distribution of vaccines” could threaten financial stability.  If the speed of the virus spread trumps the pace of the vaccine rollout, there could be “adverse macro impacts.”  Despite the uncertainty, IMF chief economist Gita Gopinath commented, “we’re certainly at least in positive growth territory this year, as opposed to last year.”

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