Daily Market Color

Yield Curve Flattens as Russia Invades

Russian President Vladimir Putin ordered troops into Ukraine, sending crude oil higher towards $100/barrel and risk assets lower. For now, the Russian invasion appears isolated to rebel-controlled regions in eastern Ukraine, though it remains to be seen whether they will stop there. Outside of energy, asset prices were challenged but not dramatically so. Equities generally closed lower across Europe and North America, the S&P 500 closing lower by 1% while the VIX or “Fear Index” ticked higher to 28.81.

Volatility in rates markets continue. Swap rates and Treasury yields whipsawed once again, this time across a flattening curve as yields shifted higher, particularly at the front end. 2-year yields would close 8 bps higher at 1.55% while 10-year yields were little changed. The spread between 2-year and 10-year yields sits at a mere 0.38%, the lowest the spread has been since August 2020.

Day ahead. Initial jobless claims, GDP data and PCE inflation will highlight tomorrow’s data releases as markets get a healthy cross section of indicators across output, inflation and labor. New home sales and mortgage applications will round out the day.

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