Daily Market Color

Rates Sell-Off on Inflation Risks

Rates jump once again- 10-year yield hits highest level since June. Swap rates and Treasury yields rose sharply across the curve as markets continued to fret about the risk of inflation. The 10-year Treasury yield rose 5 basis points to hit 1.57% while breakeven inflation rates crested to 2.50% before settling in at 2.48%. Rising prices are not just a U.S. phenomenon, across the pond the UK is struggling with an energy crisis that could see household energy bills increase by 30% over the next few months. Those inflation fears have enough to send UK rate hike bets surging, with markets pricing in a hike as early as March 2022.

U.S. initial jobless claims fell for the first time in 4 weeks. After yesterday’s strong private payrolls data, the Labor Department reported a decrease in initial jobless claims last week to 326,000. Tomorrow, the September jobs report will be released at 8:30a EST, with anaylsts expecting 500,000 jobs added during the month; more than double the amount added in August.

Senators McConnell and Schumer agree to vote on a short-term debt ceiling extension. Fears of the U.S. defaulting on its debt have subsided for the near term as Senate leaders came to an agreement to vote on a short-term extension that would increase the U.S. Treasury’s borrowing capacity by $480 billion. The Treasury market reacted to the news with the 1-month U.S. Treasury bill yield dropping to its lowest level since September 8th.

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