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Markets Recover Lost Yield As Data Supports Fed

Market yields partially recovered recent yield declines this week, as efforts to minimize the economic impact of the coronavirus appeared to gain traction.  Equity markets also rose as the S&P 500 rose to an all-time high before retreating slightly on Friday.  For the week, bond yields rose by 5-10 bps, with the largest advances in the two to five year portion of the curve. 

Virtually all of the week's economic releases beat expectations, starting with both the ISM and Markit purchasing manager indices.  The improved sentiment in the manufacturing sector was due to the U.S.-China trade agreement, but that sentiment could wane should coronavirus impacts persist. 

Friday's monthly payrolls report also surpassed expectations as 225,000 new jobs were registered in January, while wages also grew at an annualized 3.1% pace.  The strong data supports the Federal Reserve's desire to leave rates unchanged.

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