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Today’s Data Releases Send Deflationary Signals

Rates fall after data misses. Swap rates and Treasury yields dropped lower today after underwhelming JOLTS job openings and factory orders data, with the 2-year yield dropping to 3.83% from a near session high of 4.00% after the release of the aforementioned figures. The stock market broke its 4-day rally streak, largely fueled by a banking sector selloff; the NASDAQ Composite, S&P 500, and DOW dropped between 0.50% – 0.60% on the day. Elsewhere, futures suggest that further rate hikes are unlikely, with the odds of a 25bp hike at the May FOMC meeting now at 47.2%.

Today’s data releases offer deflationary signals. As markets continue to search for more clues on the impact of tighter monetary policy, today’s data releases pointed to an economic slowdown, consistent with the recent liquidity crises in global banking and new concerns about bank credit quality. The U.S. Bureau of Labor Statistics’ JOLTS release showed that job openings decreased to 9.9 million in February, below last month’s figures. This points to economic contraction, as job openings tend to be elevated when the economy is growing while labor is scarce. The largest decreases in job openings were in professional and business services, healthcare, transportation, warehousing and utilities. In addition, factory and durable goods orders continued to decline, indicating reduced demand for goods and services by U.S. consumers. 

Day ahead. Non-manufacturing PMI, trade balance, and employment change data will be released in the early-goings of the session. Crude oil figures will follow shortly thereafter.

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