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Chinese Economy, Surging Stocks Push Market Rates Higher

After treading water for much of the week, yields rose markedly on Friday followedly a strong earnings report from JP Morgan and an upbeat series of Chinese economic releases, which signalled that the world's second largest economy has regained some stability.  These led to a jump in bond yields and equities, as the S&P 500 index breached the 2900 level for the first time in six months.  Yields rose across the curve by 5-6 bps, leaving the belly of the yield curve inverted. 

The week's U.S. economic data arrived largely in line with expectations, although inflation pressures were noted in both Thursday's producer prices index as well as Friday's import price release.  These releases run counter to the latest CPI data, which indicated that U.S. consumer inflation moderated in March.  A spike in inflation is likely the only thing which would trigger the FOMC to hike the Fed funds target.

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