Daily Market Color

Rates Fall as Stimulus Talks Weigh on Markets

Treasury yields drop as ongoing stimulus talks weigh on markets

The yield curve flattened late in the trading session – the 2y10y spread narrowing to 77 bps while the 10-year UST yield fell 3 bps to close at 0.90%. Major stock indices closed lower on the day – the S&P 500 and DJIA  falling 0.1% and 0.2%, respectively.
Jobless claims rose to 853,000 last week, missing economist expectations
Initial jobless claims grew dramatically from 716,000 the week before, pulling the four-week moving average up to 776,000.  Increasing virus infection rates are the likely culprit, which have continued to put pressure on the labor market.
CPI only rose 0.2% in November
Despite the moderate rise in the CPI figure, US inflation remains low and well below the Federal Reserve’s target of 2%.  The yearly pace of inflation was unchanged in November at 1.2%, remaining well below the pre-pandemic level of 2.3%.
The ECB leaves its benchmark rates unchanged but expands its bond-buying program
The ECB added an additional 500 billion euros to its Pandemic Emergency Purchase Programme, with total asset purchases now totaling 1.85 trillion euros.  The central banks will continue to purchases assets at this rate till the “coronavirus crisis phase is over.”

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