Rates Move Higher as Global Central Banks Become Hawkish

Rates resume their march higher as German and UK yields jump. Hawkish from the BOE and ECB today (more details below) pushed yields broadly higher, German and UK 10-year rates climbing by 10 basis points while the 10-year benchmark in the U.S. rose by 6 basis points to 1.83%. U.S. equities were challenged throughout the day, the tech heavy Nasdaq Composite ending the day nearly 4% lower while the S&P fell 2.44%.

Bank of England hikes rates again, Lagarde opens the door to rate increases. As expected, the Bank of England increased its benchmark rate for the second consecutive meeting by 25 bps to 0.50%. However, one surprise from the meeting was 4 of the 9 voting members voted to increase rates by 50 bps, a signal that more hikes could be on the horizon for the BoE. Meanwhile, European Central Bank President Christine Lagarde finally acknowledged the inflationary pressures across the Eurozone and commented that, “inflation is likely to remain elevated for longer than previously expected…” What Lagarde didn’t say was even more notable, as she did not rule out a rate hike this year, despite her previous comments.

U.S. initial jobless claims decrease, January jobs report tomorrow After private payrolls showed a large decrease in January, initial jobless claims have now decreased for two consecutive weeks. The Labor Department’s January jobs report will be released tomorrow with analysts expecting a 148K increase to January nonfarm payrolls. The market may shrug off a bad print tomorrow due to the recent effects of the omicron variant on the economy.