U.S. Treasury Yield Curve
The bond market began to exhibit concern about future inflation, as signs of an improving economy and higher prices began to show up in the data. While the Chairman of the Federal Reserve maintained the current narrative—that is, accommodating monetary conditions to support economic recovery—the markets began to price uncertainty from the 5-year Treasury bond out to the 30 year. The 30-year yield increased 0.57%, in a nearly parallel shift seen in Chart 1.
The Non-Farm Payroll data through January 2021 shows a gradual weakening in new job creation and a one-month loss in December that broke the seven-month streak of positive job news that began in May 2020. The unemployment rate fell to 6.3% in the most recent sampling. The markets appear to be forecasting an improving economy, as reflected in higher long-term interest rates. The course of the economy will depend on the course of COVID-19 vaccinations and easing of emergency restrictions.
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