Interest rates surge after US jobs report

2-year yields rose by 10bps in the US after the release of a report showing 431k new jobs created in March and a sharp rebound in hourly wages to +5.6% yoy. Yields on longer maturity Treasuries are also rising, but at a much slower pace, resulting in an inversion of the yield curve with the 2-year rate exceeding the 10-year rate and even the 30-year rate. Comments by Fed members suggest that a 50bp increase in the Fed funds rate is very likely at the next meeting and perhaps at subsequent meetings, leading to increased fears that this monetary tightening will result in a sudden slowdown in the US economy, or even a recession in 2023.

Rates are also rising in the Eurozone where the rise in inflation to 7.5% in March has many central bankers nervous to say the least. As a result, the EUR/USD exchange rate is not moving much, around 1.1050.

The consequences of the spread of the pandemic in China and the discovery of atrocities allegedly committed by Russian troops in the Kiev region, making a peace deal even more unlikely, are also likely to weigh on market sentiment today, but may offset each other in terms of the impact on commodity prices.

Today we will publish a new weekly report on the macroeconomy and the oil market, which will now replace the usual Market Review contributions.