Yields edged higher as equities rebounded, as February CPI report came slightly softer than expected. Both core and headline CPI rose 0.2% m/m. below the 0.3% consensus estimate. On an annual basis, core CPI fell to 3.1%, a 3 ½ year low just below the expected 3.2%. Initially, Treasuries gave back gains as much of the decline was driven by weaker airfare prices, which is unlikely to impact core PCE, which derives its airfare data from producer prices rather than consumer's.
The curve flattened with 2yr yields nearing 4.0%, and 10’s around 4.31%. IG corporate issuance remained active, with 12 deals pricing a total of $12.5 billion, bringing the week's total to $35.6 billion.
Nasdaq led gains, rising 1.2%, supported by a 2.7% rally in semiconductor stocks. The S&P 500 added 0.49%, while the Russell 2000 rose 0.14%. However, blue-chip stocks underperformed, leaving the Dow flat on the day. Expectations for rate cuts slipped slightly, pricing in approximately 70 bps for the year.
Trump’s 25% tariffs on steel and aluminium led to gains in commodity markets. Steel climbed 1.83%, while aluminium gained 0.33%. Oil was also strong, WTI rising 2.17% closing at $67.69 per barrel.
On the central bank front, Trump is set to nominate Fed Governor Michelle Bowman as the next Vice Chair for Supervision, important for the banking sector. The Bank of Canada cut rates by 25 basis points to 2.75%, citing ongoing economic uncertainty linked to shifting U.S. trade policies. Despite the cut, the BoC’s tone remained slightly hawkish, as policymakers signalled a cautious approach to further easing.
ECB President Lagarde highlighted the increasing complexity of maintaining financial stability in a changing global landscape. Meanwhile, the German Bundestag began debating a constitutional amendment that, if passed, would pave the way for the largest fiscal expansion since the country’s reunification. Although a consensus has not yet been reached, market analysts expect a compromise to be found ahead of the March 18 vote.
The Bank of Japan is set to meet next week, with no changes to policy expected. Although strong wage momentum supports the case for an early rate hike, uncertainty around global trade policy has led the central bank to maintain a cautious stance.
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