US Economy and Credit Markets Ended April 14, 2022
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Inflation running at 40-year highs has the market anticipating a strong Federal Reserve response that has left bond prices lower as required yield has gone up. Unemployment remains very low, but inflation was reported rising 8.5% year over year, last week. This high reading, and low unemployment, leave the Federal Reserve with clear impetus to raise rates, and fast. As it stands, the Federal Funds Rate is still at 0.50 as the Federal Reserve was cautious during the last meeting due to developing conditions surrounding Ukraine. The market does not expect this caution to last, and yields have been rapidly rising since the last meeting. Since the March 15 meeting, the 10-year has moved from 2.144 to 2.827 and the 30-year has seen its yield rise from 2.478 to 2.915. Coming off record low yields, bond price sensitivity to change in yield is reflected in performance. For the US Treasury Note/Bond due 02/15/32, total return from March 15 through April 14 of this year was -5.71%. For the same period, the S&P 500 Index returned 3.16%; perhaps as investors shun yields which are well below the observed rate of inflation. Last week saw the interest rates on the popular 30-year fixed rate mortgage surpass 5.0%. This is the highest rate the 30-year has sported since 2011.  4% was only just recently pierced, in mid-March. Mr. Market has tightened conditions considerably, which could dampen home sales but has already caused refinancing activity to plummet. Major economic reports (related consensus forecasts, prior data) for the upcoming week include Tuesday: March Housing Starts (1,739k, 1,769k); Wednesday: April 15 MBA Mortgage Applications (n/a, -1.3%) and March Existing Home Sales (5.77m, 6.02m); Thursday: April 16 Initial Jobless Claims (n/a, 185k) and the March Leading Index (0.3%, unch.); Friday: April preliminary S&P Global US Manufacturing PMI (58.0, 58.8)
Posted on Monday, April 18, 2022 @ 9:34 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.