Financial markets saw the high yield primary credit market open up last week, and the investment grade primary credit market’s volumes pick up after a very slow May (actually the slowest May going back to 2012). This followed a strong spread rally to end the month. However, Treasuries and equities were pressured after a mixed May jobs report on Friday. The main read-through from that report affirmed the Federal Reserve (Fed) to be on course for at least two back-to-back half-point hikes. Additionally, Vice Chair Lael Brainard — who was the last Fed speaker to make comments before the June blackout period — stated her support for an additional half-point hike in September if inflation has not subsided by that point.
This week will be light on macro data, with the main highlights being the European Central Bank (ECB) meeting on Thursday and the release of U.S. Consumer Price Index data on Friday. The ECB is expected to start tightening, so watch for any surprises there. Additionally, inflation and consumption expectations could be revised following the release of University of Michigan sentiment surveys on Friday. We will continue to monitor the economic reopening in China as its COVID-19 situation has been improving, with infections down and lockdowns being relaxed. Sentiment feels better this morning, thanks in part to this continued reopening process.
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