US Economy and Credit Markets Ended Jan. 21, 2022

Treasury yields were mixed over the course of the week as the yield curve flattened with shorter duration yields rising moderately and longer duration yields falling moderately. Treasury yields rose significantly on Tuesday as traders priced in some risk that the Federal Reserve may raise rates by 50 basis points in March. The market implied probability of a rate hike for the March meeting increased from 91.5% last week to 99.6% on Tuesday, and settled at 98.6% on Friday. Treasury yields then dropped significantly the rest of the week as there was a significant sell-off in the equity market causing investors to seek the perceived safety of Treasurys. However, yields for shorter duration Treasurys either rose slightly or did not fall as much during the equity sell-off as the 2-year Treasury yield hit a 52-week high on Thursday. Investors took a more risk-off approach as the initial jobless claims exceeded expectations of 225k and were at a 3-month high of 286k.  Major economic reports (related consensus forecasts, prior data) for the upcoming week include: Monday: January Prelim. Markit US Manufacturing PMI (56.7, 57.7); Tuesday: January Conf. Board Consumer Confidence (111.8, 115.8); Wednesday: January 21 MBA Mortgage Applications (n/a, 2.3%), December Prelim. Wholesale Inventories MoM (1.4%, 1.4%), December New Home Sales (765k, 744k), January 26 FOMC Rate Decision Upper Bound (0.25%, 0.25%); Thursday: January 22 Initial Jobless Claims (260k, 286k), December Prelim. Durable Goods Orders (-0.5%, 2.6%), 4th Quarter Advance GDP Annualized QoQ (5.3%, 2.3%); Friday: December Personal Income (0.5%, 0.4%), December Personal Spending (-0.6%, 0.6%), January Final U. of Michigan Sentiment (68.8, 68.8).
Posted on Monday, January 24, 2022 @ 8:20 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.