Inflation

Bond traders have overestimated month-over-month headline inflation heading into four of the last seven Consumer Price Index releases, says strategist Raghav Datla.

Inflation joined supply chain struggles, wage pressures, and the labor shortage — most acutely felt with nursing staff — dragging down the sector's margins.

Amid rising construction costs and supply chain shortfalls, some California school bond projects are being redesigned, accelerated or delayed.

The secondary was quiet and the sole deal of size came from a $400 million-plus competitive water and sewer loan from Portland, Oregon. The recent rise in yields makes for more compelling levels.

Strong demand in the primary market is leading to the oversubscription of many new issues. Municipals and USTs were better again as macroeconomic concerns pressure equities.

Members of the Fed learned the wrong lesson from bizarrely focusing on the 1970s when they said "If history has taught us anything, it's to not let up too soon on inflation."

Disruptions and dislocations associated with more volatile business cycles have already created opportunities for active fixed income management, as the dramatic interest rate increase of 2022 illustrates.

Ellis Phifer, managing director and senior strategist in the fixed income research department at Raymond James, talks with Chip Barnett about the state of the bond markets. (Taped Feb. 16; 15 minutes)

While some sectors have fared better than others, those requiring construction struggle as costs rise.

"I think the bond market is right, a recession is coming," said Liz Young, head of investment strategy at SoFi, "and the economic indicators reinforce that message."