Rates Rally Ahead of CPI

Swap rates and yields take a breather ahead of CPI. After six straight sessions of rising rates, Treasurys finally rallied after a torrid start the year. Swap rates and Treasury yields were ~2 basis points lower across the curve, helping the market catch its breath, even if it’s just for a day. Tomorrow’s release of Consumer Price Index data for the month of December looms as a likely market-moving event, and comes after breakeven inflation rates climbed over 6 basis points today.

Loan growth momentum into the new year. U.S. commercial banks saw the tide turn in loan growth in 4Q 2021 as U.S. banks enter 2022 with a strong tailwind. For the first time since 2Q 2020, U.S. commercial banks saw aggregate loan growth for both C&I and CRE during the final quarter of 2021. Further, large U.S. banks (top 25 in assets) saw total loan growth exceed total deposit growth during 4Q, an initial sign that liquidity issues may be alleviating at U.S. lenders.

Checking in on inflation ahead of tomorrow’s CPI print… While wage inflation has taken the spotlight away from consumer prices over the past few weeks, CPI will wrestle its way back into the spotlight with tomorrow’s data release. The Fed’s theatrics were on full display during Fed Chair Powell’s confirmation hearing today, the central bank leader saying that high inflation poses a “severe threat” to the U.S. economy. Amid that backdrop, forecasts currently call for December’s headline CPI figure to show a 7% annualized rate of inflation- a level that would be the highest in the U.S. since 1981.