Markets mixed after inflation data renews rate hikes worries

US equities traded mixed on Tuesday after different inflation data. CPI for last month showed rise of 0.5%, while the pace over the year increase rose 6.4%, which conduct first slowing pace since mid-last year. Core CPI rose 0.4% for the month (in line with expectations) and 5.6% for the year (slightly more than expectations). As a result of data showing inflation resilience, majority of analysts now expect interest rate hikes in March and in May, with benchmark rate above 5% by the middle of 2023. The Dow Jones traded lower 0.5% to 34,089, the S&P Index remained flat at 4136, and the Nasdaq ended up 0.6% to 11,960. Treasury yields got higher yesterday, with the yield on the 2-year note up 10bps to 4.61% and the yield on the 10-year note increased 5bps to 3.73%. US Dollar remained flat with DXY level at 103.5.

Military actions continue in Ukraine, with Lugansk area as a main hotspot. Lower and Upper chamber of Parliament of Russia will have extraordinary meeting on Feb 22th, with focus on laws to integrate annexed regions to the country, according to Federation Council committee’s head Vyacheslav Tikhenko. Meanwhile rumors have appeared on potential EU sanctions on Alfa-Bank and Tinkoff-Bank. On the Russian stock markets IMOEX ended Tuesday trading session 1.4% lower at 2,232 level, while the RTSI traded down 1.35% to 952 points. Today’s morning showed slump in both indexes: IMOEX slipped 2.45% to 2,196, while RTSI continued decline with dramatic 5.3% down to 929 level. On the bond space RGBITR (gov bonds) and RUCBITR (corp bonds) showed decline during yesterday trading session and today morning, with combined dynamics of -0.33% to 609 and -0.08% to 498, correspondingly, with 10y benchmark yield rising to 10.49%.

European markets are traded in green zone during today’s trading session, following UK CPI falling to 10.1% vs 10.5% in December, which beat forecasts. However, CPI data from US brought much less optimism, as now more interest rate hikes are expected this spring. On the stock markets, the DAX index in Germany traded this morning higher 0.4% at 15,443 level, while the CAC 40 in France is up 1.1% to 7,293 level, and the FTSE 100 in the U.K. with +0.03% to 7,956 points. 10Y GILT and 10Y Deutsche Bundus yields rose to 3.42% and 2.43%, correspondingly. Today focus is on ECB head Christine Lagarde speech, as well as EU industrial update.

Soft opening for SSA as investor weigh hot U.S inflation data and mixed commentary from central bankers on the outlook for interest rates. The U.S Headline CPI was 0.5% in January in line with forecasts, though the annual figure of 6.4% was a bit more than expected. The yield on the 6-month Treasury surged to close at 5.002%, a level it hasn’t closed at since July 2007. ANGOLA (-0.295) and NIGERIA (-0.125) open lower while Ghana open flat as bets of rate falling toward the end of 2023 are being quickly unwound. Fitch downgrades Ghana’s creditworthiness to deeper junk status; assigns ‘Restricted Default’ to government bonds.

The NTB secondary market closed on a negative note with average yields rising by 25bps across the curve. Average yields across the short end of the curve rose by 65bps while that on the medium & long ends remained unchanged. Nov 9, 2023 bill saw some buying interest while Mar 9, 2023 bill witnessed some selling interest.

In the OMO secondary market, average yields closed on a flat note with average yields across the curve, closing flat.

The FGN bonds secondary market closed on a negative note with average yields across the curve rose by 10bps. Average yields on the short & medium ends rose by 50bps & 1bps respectively. The long end however remained unchanged. The Mar 2025 bond was the worst performer.