Dow went up 27, advancers over decliners 3-2 & NAZ was off 85. The MLP index climbed 5+ to the 206s & the REIT index recovered 1+ to 461. Junk bond funds fluctuated & Treasuries saw very little selling. Oil gained 1+ to the 91s & gold fell 3 to 1834.
AMJ (Alerian MLP index tracking fund)
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Treasury yields were lower, with the benchmark 10-year rate seen holding above the 2% level following the hottest inflation reading in 4 decades. The yield on the benchmark 10-year Treasury note dipped nearly 3 basis point to 2.003%. The move comes shortly after the yield, which serves as a reference point for financial assets worldwide, climbed above 2% for the first time since Aug 2019 in the previous session. Yields move inverse to prices & a basis point equals 0.01%. The 2-year yield, which saw its biggest one-day move since 2009 yesterday, retreated slightly to 1.551%. The yield on the 30-year Treasury bond, meanwhile, fell 2 basis points to trade at 2.28%. The yield on the 2-year Treasury bond, the most sensitive duration to interest rates, was last seen trading at 1.61%. The 2-year surged 26 basis points at one point yesterday, marking its biggest single-day move since 2009. This comes after the Bureau of Labor Statistics reported yesterday that the consumer price index had risen 7.5% in Jan from a year earlier, the fastest pace of US inflation since 1982. Elsewhere, the University of Michigan's preliminary consumer sentiment reading for Feb came in at 61.7, falling from 67.2 the previous month & missing expectations.
10-year Treasury yield inches lower but holds above 2% as inflation spikes
Several European countries are scrapping Covid regulations, despite the WHO urging govs to “protect their people using every tool in the toolkit.” Sweden lifted the majority of its remaining Covid-19 restrictions on Wed, following the lead of fellow Nordic nations Denmark & Norway. Meanwhile, UK Prime Minister Boris Johnson announced this week plans to end self-isolation rules for people who test positive for Covid earlier than expected. In Sweden, social distancing requirements, the use of vaccine passports & limits on the number of people gathering in one place were lifted this week. Free testing in the country also ended on Wed & the gov is looking to reclassify Covid as a disease that is “not a danger to society or a threat to public health” from Apr 1. Last week, the Swedish gov said it believed the situation was “sufficiently stable to begin phasing out infection control measures.” “Vaccination is the single most important weapon in the fight against Covid-19,” it added. In Sweden, 73% of the population is fully vaccinated, according to Johns Hopkins University. However, Fredrik Elgh, professor of virology at Sweden’s Umea University, said the country needed to “have a little more patience” & wait at least a couple more weeks before lifting restrictions. “We are wealthy enough to keep testing,” he argued. “The disease is still a huge strain on society.”
European countries are scrapping Covid rules despite warnings it’swent up 54too soon
Several Federal Reserve officials, both privately & publicly, are pushing back against calls by St Louis Fed Pres Jim Bullard yesterday for super-sized rate hikes & instead suggesting the central bank is likely to embark initially on a more measured path. The comments of these officials suggest markets may have wrongly interpreted Bullard’s remarks as being more widely held than they are by Fed officials & leadership. Atlanta Fed Pres Raphael Bostic said yesterday after the inflation report, “My views have not changed” for 3 or 4 rate hikes this year, likely beginning with a 25 basis point increase. That was the same view he gave Wed before the inflation report. (One basis point equals 0.01%). After the report showed the consumer price index rose 7.5% year over year, a fresh 40-year high, Bullard said he wanted to see 100 basis points of tightening “in the bag” by Jul, including the possibility of a 50 basis point rate hike & even potentially an intermeeting move. Stocks, which had actually shrugged off the inflation report, sold off sharply in the wake of Bullard's comments & bond yields soared. The 25 basis point move in the 2-year yield was the largest one-day increase since the global financial crisis in 2009. Markets priced in near certainty of a 50 basis point hike in Mar, even though Bullard himself said he was undecided about such a move. Later that day, Richmond Fed Pres Tom Barkin said in a speech that “I’d have to be convinced” of the need for a 50 basis point rate hike, saying there may be a time for that, but it did not appear to be now. San Francisco Fed Pres Mary Daly said after the inflation report that a 50-basis-point hike is “not my preference.”
The Fed is still likely to take a measured approach to rate hikes
Dow Jones Industrials
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