Volatile Session Ends with Rates Still Near Multiyear Highs

Rates hold at multiyear highs despite heavy issuance. Treasury yields and swap rates once again endured a volatile session, the 2-year yield trading in a 7 bp range while 10-year yields touched 1.90% before ending the day lower at 1.86%. All things considered, the market digested a wave of supply reasonably well, the Treasury’s auction of 20-year bonds going off without a hitch while six different banks successfully pricing new debt issuances. Equities endured yet another down session and are starting off the year on a rocky note- the S&P 500 and Nasdaq Composite sitting lower by 4.9% and 8.34% respectively YTD.

Inflation goes global Inflationary pressures continue to hit decade highs in the U.S., but rising prices are not unique to the U.S. Across the pond, the U.K. saw the highest consumer inflation print since 1992 with prices increasing 5.4% year-over-year in December. Our friends to the north saw a three-decade high to consumer prices as Canadian consumers battled a 4.8% year-over-year increase to consumer prices in December. Markets are now pricing in six rate hikes from the Bank of Canada over the next twelve months, while the markets are expecting the Bank of England to make a hike next month. U.S. consumer prices hit 7.0% year-over-year in December with the U.S. markets currently pricing in four rate hikes in 2022.

Day Ahead. Tomorrow will be a busy one data-wise. Initial jobless claims (the first dataset likely to be impacted by the Omicron variant) will be released tomorrow. Forecasts call for a modest decrease of claims to 230k. The Philadelphia Fed’s business outlook survey will be released. Existing Home Sales will wrap up tomorrow’s data- forecasts call for a modest decrease in sales month-over-month.