Sector Update

June 14, 2021

Treasury yields ended last week mixed with longer maturities hitting 3-month lows. Three-year and in maturities were up 1 bp while intermediate and longer maturities declined 4-11 bps. The week began with yields up 1-2 bps across the board on Monday but fell Tuesday through Thursday. At that point, yields were down 7-13 bps for the week. Yields came back 2-3 bps on Friday though.

Even with the Friday selloff, the 10-year ended the week down 11 bps, its biggest one-week decline since the week ended June 12, 2020. Remember what was going on then? Among other things that week, Fed Chair Powell said, after a prior week of exuberance that saw the 10-year increase 24 bps, that the FOMC is “not thinking about raising rates, we’re not even thinking about thinking about raising rates.” I’m not certain they would still echo those same sentiments now, but after yields declined in the wake of a higher than expected CPI reading and consumer expectations of inflation remain high, I’m particularly interested in the Fed’s Wednesday policy announcement, especially the following press conference which could be the catalyst for some volatility.

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Today – Yields higher, curve steeper, stocks mixed

Yields end week mixed – 10-Year has largest weekly decline since June 2020

10- and 5-year yields break out of recent range, down apprx. 25 bps from peak

Yield Curve Shape – 2s-5s and 2s-10s still relatively steep, break below recent ranges

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 (June) | Monthly, 5th business day

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

WSJ Saturday Essay: When Americans Took to the Streets Over Inflation

“Nearly half of the U.S. population was born after 1981, the last year of double-digit consumer price increases. But America’s long inflation holiday shows signs of ending. Consumer prices are now rising again: The Labor Department’s consumer price index rose 5% in May from a year earlier, the biggest increase in more than a decade. History provides some useful lessons.”

WSJ: From Beans to Burgers, Food Is Getting More Expensive

“Prices for cooking oils, wheat, corn and other ingredients are surging due in part to bad weather abroad and strong export demand. Labor shortages are hampering operations at stores from Starbucks Corp. cafes to supermarkets, prompting many employers to raise wages. Costs to transport food products are up by as much as 25% from a year ago for some food makers because of high demand for shipping during the pandemic coupled with a shortage of truck drivers.”

Vining Sparks: Coronavirus Chartbook

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