Daily Market Color January 3, 2023Yields Fall Following European Inflation Data 2023 opens with risk-off sentiment. Treasury yields and swap rates fell to kick off the year, the 2-year Treasury yield falling ~6bps and the 10-year yield declining by ~14bps. The move came as markets digested news of an unexpected decline in German inflation ahead of a data-packed Wednesday. Elsewhere, equities fell on the first trading day of 2023, the S&P 500 and NASDAQ falling .40% and .76%. Initial US Manufacturing PMI data shows factory activity contraction. The S&P Global US Manufacturing PMI was 46.2 for December, in-line with estimates and down from November’s 47.7 figure. Weaker client demand drove faster contractions in output and new orders, driving the fastest decline in factory activity since May, 2020. Companies also reported the second-slowest rate of job creation in the current 29-month sequence of growth. Day ahead. Tomorrow’s session will be busy, with FOMC minutes at 2 PM ET the major headline. Manufacturing PMI and job openings data (10 AM) will come earlier in the day, where both figures are expected to decrease from last month’s levels.