Daily Market Color February 23, 2021Markets Preparing for Inflation Inflation front and center for investors Equities continued their losing streak as rising rates weighed on stocks, the S&P 500 falling 0.77% – marking its fifth straight day of declines. Tech stocks were the laggards, the Nasdaq 100 hitting a three-week low following a 2.63% decline. Swap rates and Treasury yields continued their relentless march higher- the 10-year Treasury yield rising 3 basis points on the day to 1.37%. The spread between the 5yr and 30yr Treasury yields touched its highest level in more than five years. Traders prepare for earlier Fed rate hikes Swap and futures markets are now pricing in the first 25bps Fed rate hike in mid-2023, a full year earlier than they did coming into 2021. The United States isn’t the only country that has seen a rebound in long-term government yields- 10-year government bond yields have risen on average 25 basis points in Europe and in AsiaPac 10-year yields have risen a remarkable 80 basis points in New Zealand and Australia. Economic activity increased in January The Chicago Fed National Activity Index increased to 0.66 in January, up from 0.41 in December. The January increase beat economists’ expectations of 0.15. The index was primarily driven by increases in personal consumption and housing, which rose 0.35 points compared to minus 0.06 in December.