Daily Market Color September 13, 2021Yields Fall Ahead of CPI Release Treasury yields and swap rates pull back ahead of CPI data, but remain in recent range. Swap rates and Treasury yields declined modestly ahead of tomorrow morning’s CPI data, the 10-year Treasury yield falling 1.5 basis points to close at 1.33%. Long-term rates have traded in a 10 basis point range since early August – the Fed’s jawboning having successfully kept inflation fears at bay for the meantime. Risk assets bounced back after a down week, the S&P 500 climbing 0.23% on the day while the VIX or “Fear Index” continued to grind lower- falling to a docile level of 19.37. Market turns its focus to CPI data as consumer expectations of inflation rise. The Fed’s August Survey of Consumer Expectation showed that one-year inflation expectations increased to 5.2%. This is the tenth straight month of increasing expectations and a record high for the survey. Tomorrow at 8:30 EST, the Labor Department will release August’s consumer price index (CPI) data. If headline CPI remains above 5%, it will mark the first time in over 30 years that the index has breached 5% for two consecutive months. Commercial lending heats up as deposits continue to grow. The Fed’s weekly H8 Loan Data release showed signs of an acceleration in CRE lending. Large banks (the top 25 in total assets) grew CRE loans at their fastest pace of the year while small U.S. banks (banks below the top 25 in total assets) saw CRE loan growth of 6.36% on an annualized basis. That said, the Fed’s release showed that deposits also continued to grow, outstripping the acceleration in loan growth to pull loan to deposit ratios to a historic low of 59.9%.