Sector Update

July 19, 2021

Last week saw yields move lower for the third week in a row. Yields actually increased through Tuesday then declined the rest of the week as markets grappled with a Fed sticking to their message of inflation being transitory and the potential for slower growth as the Delta variant continues to spook markets.

These concerns are still very evident today as yields opened meaningfully lower across the curve in a flattening move that has pushed the 2s-10s below 100 bps for the first time since early February. At first, the optics of the 2s-10s going below 100 bps is a little shocking. It is worth remembering we went nearly 3.5 years below 100 bps between 2017 and February of this year.

Until this morning, the 5-year portion of the curve has been spared some of the declines seen in longer yields. As markets digest the potential for slower growth, it makes sense that the 5-year has joined more in the declines as the Fed could face less pressure to move short-term rates. Further, if inflationary concerns remain (or at least perceived to be) transitory, there seems little impetus for longer-term yields to move higher.

Today – Yields fall, curve flatter, and equities broadly declining

Yields end week lower – led by longer maturities in a bull-flat move for third week in a row, continuing today

Yield Curve Shape – 2s-5s at 64% of YTD high, 2s-10s at 64% of YTD high – breaks below 100 bps this morning

Food for Thought – Small business trends, inflation concerns continue to move higher

Sector Commentary (click on links for more in-depth look)

What We’re Reading

Market Today | Daily

Weekly Recap | Weekly, Friday

Brokered Deposit Rate Indications | Weekly, Monday

Investment Alternatives Matrix | Weekly, Tuesday

MBS Prepay Commentary (July) | Monthly, 5th business day

SBA Prepay Commentary (July) | Monthly, 10th business day

WSJ: Tax-Increase Talk Prompts Wealthy to Splurge on Muni Bonds

“In the first six months of 2021, U.S. municipal bond funds attracted an estimated $56.9 billion in net new money—the most for any first half of the year going back to 1992, according to data from Refinitiv Lipper.”

Vining Sparks: Coronavirus Chartbook

The information included herein has been obtained from sources deemed reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the projection period may vary from the projections. The firm may have positions, long or short, in any or all securities mentioned. Member FINRA/SIPC.
Copyright © 2021
This is a publication of Vining-Sparks IBG, L.P.
775 Ridge Lake Blvd., Memphis, TN 38120