Daily Market Color July 8, 2021Rates Rally for the Third Day in a Row Treasury yields continue to decline for a third consecutive day Rates extended their rally today as doubts surrounding the sustained economic recovery continue to build. Treasury yields and swap rates ended the day 1-4 bps lower across a flattening curve – the 10-year UST yield closed 2 bps lower at 1.29%. Major equity indices closed in the red – the S&P 500, DJIA, and Nasdaq fell 0.9%, 0.8%, and 0.7%, respectively. 373,000 jobless claims were filed last week First-time jobless claims unexpectedly rose to 373,000 from 371,000 the week prior. Continuing claims on the other hand, which captures ongoing benefits, decreased from 3.484 million to 3.339 million, the lowest level since last March. Over 14.2 million people continue to receive pandemic-related unemployment benefits, though the program is set to expire nationwide in September. ECB revises its inflation target Akin to the Fed, the European Central Bank has adopted an inflation policy that allows for a temporary overshooting of its 2% target level. In their strategy review published earlier today, the ECB still holds the view the eurozone needs “especially forceful” stimulus for the time being, which they forecast could result in “a transitory period in which inflation is moderately above target.” ECB President Christine Lagarde added, “The new formulation removes any possible ambiguity and resolutely conveys that 2% is not a ceiling.” While shifting benchmark interest rates will be the ECB’s “primary” tool to combat potential runaway inflation, the central bank could also adjust its PPP bond-buying effort, which is expected to continue till 2022.