Daily Market Color

Yield Curve Flattening Continues as Investors Prepare for Fed Taper

Curve flattening continues as PPI data fails to surprise to the upside. The 10-year Treasury yield grinded lower for the third straight session, declining 2bps on the day to close at 1.51%. The 10-year Treasury yield now sits ~10bps below its recent high after rising over 30 bps over the prior month. Meanwhile, short-term rates have headed in the opposite direction as the market prices in imminent central bank policy action- the 2-year Treasury yield hitting YTD highs today at 0.36%.

Jobless claims break below 300,000 to lowest level since March 2020. The four-week moving average for jobless claims, a figure that helps remove weekly volatility, fell to 334,250- the lost level since March 2020. Rising wages and the ending of several pandemic-era unemployment programs are likely behind the  increase. As of September 25th, approximately 500,000 individuals have stopped receiving any enhanced benefits, while 3.65 million are still receiving some sort of enhanced assistance.

September producer prices increased by the smallest amount this year. Headline producer prices rose 0.50% in the month of September. While that’s the smallest monthly increase in 2021, year-over-year headline PPI growth continued its upward trend- rising to 8.6%, a fresh record high for the index. Core PPI, which excludes the volatile inputs like energy and food prices, only increased 0.2% month-over-month, and 6.8% year-over-year- both below forecasts.

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