US Economy and Credit Markets Ended Feb. 18, 2022
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U.S. Treasury bond yields finished the week lower across the yield curve as markets reacted to the fluid Ukraine-related news and persistent inflation pressure on the U.S. economy. Producer Price Index (the PPI) data was reported early last week. The PPI rose 1.0% in January, 0.5% higher than expected. Producer prices are up 9.7% versus a year ago, reaffirming that inflation is rampant in the U.S. economy. Treasury yields jumped on Tuesday, most notably the 10-year treasury yield hit its highest level since July 2019. Investors shifted to risky assets in reaction to Ukraine-related headlines suggesting easing tensions. The Federal Open Market Committee (the FOMC or the Fed) January meeting minutes were released on Wednesday. Compared to the dramatic policy shift from the Fed at the beginning of the year, commentary out of the Fed's January meeting was tamer. Most notably, the Fed made no clear hint to a 50 bps rate hike in their minutes. According to Bloomberg's calculation, the odds of a 50 bps rate hike instead of a 25 bps rate hike dropped from 63% to 50%. Treasury yields fell sharply on Thursday as Ukraine-related tensions re-emerged. Ukraine officials and separatists exchanged blame over ceasefire violations and U.S. President Biden mentioned a Russian invasion into Ukraine could happen in the next "several days." The geopolitical uncertainty renewed investor interest in safe haven assets going into President's Day weekend. Major economic reports (related consensus forecasts, prior data) for the upcoming holiday-shortened week include Tuesday: February Preliminary Markit US Manufacturing PMI (56.0, 55.5), February Preliminary Markit US Services PMI (53.0, 51.2), February Preliminary Markit US Composite PMI (53.0, 51.2).
Posted on Tuesday, February 22, 2022 @ 8:32 AM

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