Markets Prepare for Packed Calendar Ahead

Rates rise ~3bps across the curve. Swap rates and Treasury yields rose 2-3bps today to kick off PCE week, which is set for release on Friday. Relatively weak demand at today’s $63B 2y and $64B 5y UST auctions drove much of the price action, as substantial supply continues to overwhelm demand. The 2s10s inversion is now its most inverted since December at -45bps, as the 2-year yield is above 4.70% and the 10-year is just under 4.30%. Elsewhere, Bitcoin rose to a two-plus year high, now just under $55k.

Jamie Dimon thinks soft landing bets are too optimistic. Speaking today at the JP Morgan High Yield and Leveraged Finance conference, Jamie Dimon said he thinks there is a “better-than-even” chance of the U.S. entering recession. He said, “The market is kind of pricing in a soft landing. That may very well happen…but the [market’s] odds are 70 to 80 percent, I’ll give you half that, that’s all.” Still, he doesn’t think a possible recession will be as serious as 2008. Commenting on regional banks, he thinks a recession and higher rates could hit commercial real estate and regional banks hard, but he said the issues faced by SVB and NYCB were “idiosyncratic.”

Israel surprises, leaves policy rate unchanged. Israel’s central bank announced this morning that they would leave their key rate at 4.5% after cutting rates by 25bps in January. Forecasts called for a second consecutive 25bp rate cut, but war-related inflation concerns fueled a cautious approach. Governor Amir Yaron said, “There is still uncertainty related to the impacts of the war on inflation processes,” though he made clear that the central bank will continue to ease policy if inflation stabilizes. Annualized inflation most recently slowed to +2.6% in January 2024, a sharp decline from +3% in December and well below the cycle’s peak of 5.4% in January 2023.