Treasury yields are lower and flatter to start the day as the markets continue to digest yesterday’s FOMC meeting as well as the ongoing conflict in Ukraine. The Fed’s updated participant forecast for the fed funds rate (the “dots”) was more hawkish than the market had expected, with the median projection showing more than 10 rate hikes (25 bps each) by the end of 2023. That is two more hikes in 2023 than the market was priced for going into the meeting, and front-end yields repriced 8-9 bps higher yesterday afternoon. The hawkish tone from the Fed is fueling more chatter in the bond market of potential policy error and recession risk, with some pointing to the fact that the 5-year/10-year Treasury yield spread inverted at one point yesterday afternoon for the first time since March 2020. At one point this morning, the 3-year/10-year spread inverted for the first time since March 2007. Household and corporate balance sheet fundamentals are relatively strong right now, but the growing concern is that a too-hawkish Fed will erode those fundamentals as the year progresses.
Chief Investment Officer
|3/17/2022||Housing Starts MoM||3.80%||6.80%||-4.10%||-5.50%|
|3/17/2022||Building Permits MoM||-2.40%||-1.90%||0.70%||0.50%|
|3/17/2022||Philadelphia Fed Business Outlook||14.5||27.4||16||—|
|3/17/2022||Initial Jobless Claims||220k||214k||227k||229k|
|3/17/2022||Industrial Production MoM||0.50%||—||1.40%||—|
|3/17/2022||Manufacturing (SIC) Production||1.00%||—||0.20%||—|
|3/18/2022||Existing Home Sales||6.10m||—||6.50m||—|
|3/18/2022||Existing Home Sales MoM||-6.20%||—||6.70%||—|
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