Daily Market Color

Treasury Yields Turn Lower After Weak CPI Data

Rates hold steady after modest inflation data
Treasury yields and swap rates closed 1-2bps lower across the curve, taking a break from the recent volatility in bond markets. Highlights of the trading day included the monthly CPI data print that fell roughly in line with median forecasts, and the Treasury’s 10-year note auction, which was met with slightly lower-than-expected demand.  Major US equity indices closed higher – the S&P 500 rose 0.6%, while the DJIA climbed 1.5% to a record high.
CPI rose 0.4% in February and 1.7% from a year earlier
Rising energy costs were the main driver, with gas prices rising 6.4% last month.  Core CPI, which excludes food and energy, was up 0.1% (0.2% expected) from January and 1.3% from the past 12 months.  The pace of inflation is expected to grow in the coming months due to additional stimulus funds.
House approves COVID-19 stimulus bill
In a 220 to 211 vote, the House passed the $1.9 trilllion stimulus bill.  House Speaker Nancy Pelosi, alongside other Congressional Democrats, celebrated the passage of the bill, calling it a “force for fairness and justice in America.”  President Biden plans to sign the bill on Friday.
US budget deficit rises to $311 billion in February
Today’s Treasury statement revealed higher costs from pandemic-related expenses such as unemployment benefits and healthcare drove the federal deficit higher.

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