Source: US Dept. of Treasury End of Day
• Rates rose last week with the 2-year Treasury note yield increasing by 17 basis points to 3.73% and the 5-year note by 13 basis points to 3.86%.
• Oil prices have surged due to the Mid‑East conflict, raising gasoline costs and pressuring lower‑income households, though the broader economy is now less energy‑dependent than in past oil shocks.
• Inflation risks are rising but not spiraling, with higher energy prices expected to hit headline inflation more than real economic growth, and consumer sentiment weakening under visible price hikes.
• Financial markets are reacting, as bond yields climb and mortgage rates rebound, reflecting concerns that war‑related price pressures may limit the Federal Reserve’s ability to cut rates.
• Economic momentum is mixed, with tax refunds and wage gains supporting spending, but recent GDP revisions and uneven income sources—like dividend-driven gains—suggesting underlying fragility.
• Labor demand remains resilient, and the Fed is expected to hold rates steady, though traders now anticipate fewer rate cuts as geopolitical uncertainty clouds the inflation outlook.
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