Daily Market Color

Inflation Fears Sends 5-Year U.S. Treasury Yield to Pre-Pandemic Levels

Inflation fears send rates higher across the curve. The 10-year U.S. Treasury yield closed up 4 bps on the day to close at 1.70%, a level not seen since April.  The belly of curve saw the biggest movement with investors increasing their bets that the Fed might tighten sooner than expected. The 5-year U.S. Treasury closed up 7 bps, to close at 1.24%, the highest level since February 2020, before the onset of the pandemic. The S&P closed at a record high, the first time since early September, on strong corporate earnings and CDC approval of Moderna and Johnson & Johnson booster shots.

U.S. initial jobless claims hit a new pandemic low, decreasing for the third consecutive week. Initial claims dropped 6,000 from the prior week to 290,000, the lowest number since March 14, 2020; right before the country went on lockdown. The reduction in jobless claims has been reassuring after the disappointing September jobs report earlier this month. Fed Governor Christopher Waller has commented that up to two million jobs lost during the pandemic will not return due to early retirements.

Philly Fed business activity index dropped in October. The index fell to 23.8, down from 30.7 in September, revealing slowing economic activity within the third Federal Reserve district (includes Delaware, Southern New Jersey, and Eastern & Central Pennsylvania). A number over zero indicates growth. Businesses within the region continue to battle higher input prices with 73% of firms reporting price increases compared to only 3% reporting decreases.

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