Daily Market Color

Benchmark 10-Year Falls to 5-Week Low

10-year Treasury yield falls to lowest level in 5 weeks
While expectations of inflation remain strong, Treasury yields and swap rates fell 1-5 bps on the day – the 10-year UST yield closed 4 bps lower to 1.55%.  Despite a strong start to corporate earnings season, rising virus cases pulled equity indices lower – the S&P 500 and DJIA fell 0.7% and 0.8%, respectively.
Biden administration open to a smaller corporate tax hike
To help finance the Biden administration’s infrastructure deal, the White House proposed raising the corporate tax from 21% to 28%.  Some Republican Congress members disapprove of the large tax increase and have proposed between a 2-3% increase.  In response, President Biden said, “I am prepared to compromise, prepared to see what we can do and what we can get together on.”
EU lending declined for a third quarter in a row
Triggered by the eurozone’s slow economic recovery and lockdowns, demand for loans and credit lines turned lower according to the ECB.  The central bank believes credit lines will continue to tighten in Q2 but expects loan demand to increase due to postponed investments.  The ECB’s rate-setting committee will hold a meeting on Thursday to discuss current policy, though economists are not expecting any changes.

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