The jump in Treasury yields has become the focal point now that long-dated rates are at their highest levels since last February. The long bond tested 2.15% on Friday and the 10-year hit 1.36%, having cheapened from 1.657% and 0.914%, respectively, at the start of the year. With the improvement in vaccine distribution, the reduction in virus cases, along reopenings, a reflation trade is strengthening.
That, the potential for another massive stimulus package and the FOMC’s willingness to let the economy run hot are starting to raise inflation fears. Meanwhile, Wall Street is turning more consolidative after hitting new highs.
This will be a busy week of data and events, though today’s slate is on the light side. The January leading indicator index is expected to increase 0.7%, more than double December’s 0.3% rise, and in line with the hefty gains seen since recovering last May. The February Dallas Fed index is seen improving to 8.0 from 7.0. The January Chicago Fed national activity index is also due.
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There is Fedspeak from Kaplan and Bowman. Note that Fed Chair Powell will go to Capitol Hill Tuesday and Wednesday to present his semi-annual Monetary Policy Report (aka Humphrey Hawkins) to Congress. For earnings, reports are due from Cadence Design, Agora, Palo Alto Networks, SBA Communications, Republic Services, Williams Companies, Occidental Petroleum, Discovery, Zoom, ONEOK, and Ingersoll Rand.