Daily Market Color

Rates Fall Ahead of Key Inflation Data

Rates fall 2-9bps while next week’s PCE print awaits. Swap rates/Treasury yields fell 6-9bps at the long end of the curve today, leaving rates little changed on the week. The move was largely a reversal of recent risk-on sentiment, spurred by Nvidia’s strong reported earnings. Meanwhile, Fed President John Williams also contributed after he noted that rate cuts will commence “likely later this year.” Equities were little changed today in a great week overall, which saw the S&P 500 and Dow break all-time highs. Attention now shifts toward PCE data next week, where core inflation is expected to rise MoM and fall YoY.

ECB President Lagarde says slowing pay growth was “encouraging.” The ECB’s negotiated wage indicator showed on Tuesday that Q4 pay growth declined from 4.7% to 4.5%, a positive signal ahead of Q1 data to be released in May. ECB President Christine Lagarde called the growth decline “encouraging” but cited the Q1 print as crucial. She and other ECB policymakers have voiced that rate cuts cannot commence until the data is released; Greek central bank chief and ECB governing council member Yannis Stournaras said today that “we won’t have enough information to decide on rate cuts before the end of the second quarter — so June.” Futures markets reflect the sentiment, as a 25bp rate cut is priced in for June as the first of four expected 2024 cuts.

Former President Trump largely expected to win tomorrow’s South Carolina GOP primary. The South Carolina GOP primary election will occur tomorrow, with former President Trump and Nikki Haley as the top contenders on the ballot. Though Haley served as the state’s governor from 2011 to 2017, a recent USA Today poll found that Trump leads with 63% support compared to Haley’s 35%. The former governor faces a difficult path to the presidency after failing to win any states so far, but she has vowed to remain in the race. Commenting on the outlook, Haley’s campaign manager Betsy Ankney said, “We know that the road is difficult. We know that the math is challenging, but this has never just been about who can win a Republican Primary…this battle is about who can win in November…”

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