Yield Curve for 1/19/2023The yield on the US 10-year Treasury note, seen as a proxy for global borrowing costs, bottomed around 3.3%, the lowest since September 2022, as mounting fears of a sharp economic downturn and prospects of a less aggressive Federal Reserve boosted appetite for government debt. Data released Wednesday showed that Americans curbed spending while business investment fell, heightening concerns that the economy may be moving closer to recession. At the same time, producer prices slid by the most since the pandemic's start, offering further evidence that inflation had already peaked while giving the Fed room to slow its monetary tightening. Money markets are now pricing an almost 95% chance that the US central bank will hike rates by 25 basis points in February. Still, hawkish remarks from several Fed policymakers highlighted that the fight against inflation is far from over.
US 2 Year Note Bond Yield was 4.14 percent on Thursday.
The Dow lost more than 200 points on Thursday, while the S&P 500 and Nasdaq 100 were down roughly 1% as investors fled equities over concerns about a looming recession. The labor market remained tight, with the number of Americans filing for unemployment benefits falling last week to the lowest in four months, throwing some cold water into expectations that the Fed will pivot away from its aggressive stance. At the same time, recent data showed retail sales, producer prices, and industrial production fell more than expected in December, exacerbating worries of a slowdown in the world's largest economy. Even after such dismal data, the US central bank kept its foot on the pedal, with Boston Fed President Susan Collins among the latest policymakers to warn that rates must rise further to bring down inflation. On the corporate side, consumer products giant Procter & Gamble declined 2% after reporting a decline in sales volume.
Gasoline futures continued their upward trend toward $2.6 per gallon, the highest level in two months, tracking gains in other energy-related commodities on optimism about future fuel demand. On the supply side, OPEC and its allies decided in December to stick with their policy of curtailing oil output, restricting global supplies by 2 million barrels per day until the end of 2023. Meanwhile, the latest EIA report showed that gasoline inventories in the US rose by 3.483 million barrels in the week ending January 13th, compared to analysts' expectations of a 2.529 million build.
