Earnings and Manufacturing Data Fuel Bond Rally

Treasurys rally, equities mixed as earnings season rolls on. Swap rates and Treasury yields took a slight hit today, the 2-year and 10-year yields falling by ~2bps to 4.21% and ~6bps to 3.45%, respectively. The move came as companies continued to report earnings, headlined by Microsoft and Texas Instruments. Among major equity indices, the S&P 500 and NASDAQ Composite suffered minor losses of .05 – .30%, while the Dow Jones Industrial Average grinded higher by ~.30%. Economic data was also mixed, as PMI beat expectations while Richmond manufacturing decreased to -11 in January from +1 in December, the lowest since level May 2020. 

January PMI data shows continued economic contraction. S&P Global US Composite PMI Index was 46.6 in January, slightly higher than the estimated 46.4, and above last month’s level of 45. The index is calculated by surveying senior executives in a variety of industries, and is a measure of the prevailing direction of economic trends. A reading above 50 indicates economic expansion, while a reading below 50 indicates contraction. Chris Williamson, Chief Business Economist at S&P Global, commented on the data, saying that the rate of decline was among the steepest since the global financial crisis.

Day ahead. Mortgage application and rate figures will be released at 7 AM ET. Crude oil and gasoline stock changes will follow at 10:30 AM.