Daily Market Color

Swap Rates and Treasury Yields Rebound Once Again

Treasury yields resume their climb as inflation expectations rise
While optimism around the stimulus package and vaccine rollout continues, rising jobless claims weighed on markets.  Major US equity indices closed lower – the S&P 500 and DJIA both falling 0.4%.  Treasury yields and swap rates rose 1-5 bps across the curve – the 10-year UST yield closed 2 bps higher at 1.29%.
861,000 jobless claims were filed last week vs 848,000 the week prior
The figure was higher than expected, as economists had forecasted claims to continue their downward trend.  The four-week moving average is now 833,250.
Housing starts drop 12% from December while permits jumped 9.6%
Housing demand continued to stay elevated in January due to the current low mortgage-rate environment, but the recent spike in lumber costs delayed home building.  Lumber prices rose above $1,000 today, more than double the price from three months ago.  Demand is expected to continue in the short-term, as permit growth remains strong (~28% higher than last year).
Treasury Secretary Janet Yellen dismisses potential inflation risks caused by impending stimulus package
She commented, “Inflation has been very low for over a decade, and you know it’s a risk, but it’s a risk that the Federal Reserve and others have tools to address.”  Though size of the $1.9 trillion bill remains a concern for markets, Yellen still thinks “it’s very important to have a big package [that] addresses the pain this has caused.”

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