Inflation data stole the headlines, but reports on retail sales, manufacturing, and consumer sentiment were also released last week (February 12 – 16). Market participants may have been on edge about inflation, following faster than expected wage growth in the January jobs report that had pushed market interest rates higher and led to a brief, though volatile, correction in stocks during the previous week. However, even though both consumer and producer inflation came in above expectations, and interest rates moved higher, stocks saw gains every day last week. The S&P 500 closed the week 4.4% higher as investors renewed their focus

As 2017 ended, fixed income investors were searching for income, after several years of 10-year Treasuries yielding less than 2.5%. When 2018 began, this changed quickly as tax reform and signs of inflationary pressures pushed market interest rates higher. The 10-year Treasury yield rose 0.87%, from a starting yield of 2.04% on September 7, 2017 to 2.91% on February 15, 2018. Investors have grown concerned that improving economic data and rising inflationary pressures may cause the Federal Reserve (Fed) to raise interest rates in 2018 at a more aggressive pace than originally anticipated. Given this backdrop, investors are naturally reassessi

Tax reform progress and ultimate passage during the fourth quarter dominated headlines, sending short-term yields much higher amid increasing expectations for future Federal Reserve (Fed) rate hikes. With longer-term Treasury yields more muted, the Treasury yield curve flattened again over the quarter, and made for a positive month for all major fixed income sectors [Figure 1].

Much like the first three quarters of the year, economically sensitive domestic sectors of the bond market were aided by investors’ ongoing search for income in a low-yield, low-return environment and by steady economic data, which cont

Inflation and economic growth are key drivers of long-term rates, and rising rates can lead to higher borrowing costs for individuals and businesses, potentially impacting consumer spending and profit margins for businesses. Given the recent market volatility, the January Consumer Price Index (CPI) report, which will be released on Wednesday, February 14, could become a focal point for markets. Consensus forecasts expect that both headline and core CPI (which excludes volatile food and energy prices) may slow down on a year-over-year basis to 1.9% and 1.7%, respectively, but given the focus on rising rates and their potential impact for equit