In a move that echoed the early days of 2021, markets got off to a rough start during the first week of 2022 as rising bond yields pushed discount rates higher for all risk assets.

The release of the December FOMC minutes provided a clearer window into the Fed’s current thinking on inflation risks, and investors responded by pushing yields higher across the curve: 2y yields rose 13bp to 0.86% (a fresh pandemic high), 10y yields rose 25bp to 1.76% (also a new pandemic high), and 30y yields rose 22bp to 2.12% (still well off last year’s high of 2.40%). See the Chart of the Week for a time series of 2y Treasuries.

Credit spreads were mostly stable last week, pushing the price declines in
Treasuries through to corporate and municipal bonds as well.

In US equity markets, long-dated tech and other secular growth stocks were hit the hardest, sending the Nasdaq down 4.5% on the week. Cyclicals fared much better, with the energy sector posting a +10.6% total return, resulting in smaller declines for the S&P and especially the Dow. Small caps and international stocks also finished lower on the week.

Oil prices rose thanks to supply disruptions related to events in Libya and
Kazakhstan. OPEC+ announced an agreement to increase output that was in line with expectations.