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


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