Rates End a Volatile Day Higher Across a Steepening Curve

Swap rates and Treasury yields end volatile day higher while equities close at another all-time high. Swap rates and Treasury yields began the day by rallying at the long-end of the curve but reversed course after weak demand for Treasury’s 7-year auction. The 10-year U.S. Treasury yield would eventually close 4 bps higher at 1.58%, breaking a four-day streak of declining rates. Equities continued to push higher – the S&P is on pace to close October with a 6.0% gain after hitting another all-time high.

European Central Bank slows bond purchases, rebuffs inflation fears and calls for rate hikes. The ECB concluded its two-day meeting with an announcement that it would continue its pandemic bond purchase program, albeit at a slower pace from the previous $80B euro / month level it had maintained previously. In her press conference ECB President Christine Lagarde pushed back on fears of “stagflation” despite multidecade inflation highs in Germany and Spain, but did acknowledge that inflationary pressures may continue into 2022. Central Banks have been divided in their response to worldwide inflationary pressures, the Bank of Canada having just yesterday announced a surprise end to QE and a forthcoming rate hike (joining other aggressive central banks like those in Brazil and the UK) while the ECB and Federal Reserve have been more measured in their response thus far.

Apple and Amazon third quarter results disappoint amid supply chain issues. The two tech giants reported earnings after the market close and appear set to reverse today’s record-setting session when equity markets open tomorrow. Apple CEO Tim Cook told CNBC that supply constraints were the main culprit behind the earnings miss and that they cost the tech giant $6B in Q3. Both Amazon and Apple are lower in after hours trading.