Yields climb on strong economic data, continued inflationary concerns. Treasury yields traded higher today as ISM services saw the fastest pace of expansion since 2022, with oil-related inflation risks from the war in Iran also creating upward pressure. The 2-year and 10-year yield closed 4 bps higher at 3.55% and 4.10%, respectively. Meanwhile, equities rallied on the strong services data, with the S&P 500 closing up 0.78% and the NASDAQ up 1.29%. Oil saw another volatile session, with WTI crude climbing past $77 per barrel, later falling to ~$73, and closing at $74.66.
US services activity increases by most in nearly three years. The headline ISM services index came in at 56.1 in February, above estimates of 53.5 and the prior month’s 53.8. The 2.3-point jump marks the fastest growth since mid-2022, driven by an increase in new orders and business activity. Fourteen sectors reported growth, led by mining, information, and real estate, while only three industries contracted. The ISM measures of new orders and employment both hit one-year highs, at 58.6 and 51.8, respectively, boosted by increased demand. Additionally, ISM services prices paid came in at 63.0, well into expansionary territory but below the forecasted level of 68.3 and January’s 66.6. The gauge could offer a welcome sign of cooling inflation, although the ISM survey period occurred prior to US-Israel attacks on Iran.
US likely to implement 15% global tariff this week. Treasury Secretary Scott Bessent said the broad 15% tariff President Donald Trump pledged following the Supreme Court’s decision to strike down his “Liberation Day” tariffs are likely to be implemented “sometime this week.” Bessent’s comments offer the clearest insight so far into potential timing of the tariffs, though the reach of the duties remains uncertain. US Trade Representative Jamieson Greer suggested last week that this would not be a universal rate, and the EU expects that they will not face this increased tariff. Bessent did not provide clarity on who this rate will apply to, though he noted that the new levies only have 150 days to remain in place without receiving congressional approval. During this period, Bessent expects officials to work to legally restore the tariff regime under different sections of the IEEPA, saying, “It’s my strong belief that the tariff rates will be back to their old rate within five months.”