US Economy and Credit Markets Ended Feb. 16, 2018

Short-term Treasury yields rose sharply last week as investors reacted to stronger than expected inflation data. January's reading for Core CPI, which excludes volatile food and energy prices, came out at 0.3% on Wednesday, beating the median consensus of 0.2%. This was the largest monthly increase in over a year and the acceleration has boosted the three-month annualized core CPI to 2.9%. The Producer Price Index report on Thursday also showed prices climbing higher than expectations, with the year-over-year reading rising to 2.2%, excluding food and energy. Bond yields spiked with the benchmark 10-yr Treasury note touching a multi-year high of 2.94%. Consequently, fed funds futures have solidified a March rate increase and reflect an increased probability of four rate hikes this year versus three. The January 31 FOMC meeting minutes will be released on Wednesday, which investors will scour for insight on the Fed's expectations for inflation. February CPI data will be available before the March FOMC meeting, which will be the first led by the new Fed Chair Jerome Powell. At his swearing-in ceremony, he reiterated the Fed's plan of gradual rate increases and balance sheet normalization unless economic data points to financial instability. Major economic reports (related consensus forecasts, prior data) for the upcoming holiday-shortened week include Wednesday: February 16 MBA Mortgage Applications (N/A, -4.1%), January Existing Home Sales (5.62m, 5.57m), and February preliminary Markit US Manufacturing PMI (55.5, 55.5); Thursday: February 17 Initial Jobless Claims (230k, 230k), February 10 Continuing Claims (1935k, 1942k), and January Leading Index (0.7%, 0.6%).
Posted on Tuesday, February 20, 2018 @ 8:14 AM

These posts were prepared by First Trust Advisors L. P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.