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Market Update

Volatility across all sectors as the market anticipates a slower recovery

July 12, 2021


COVID variants and disappointing economic data dominated the market this week, leading to volatility in all sectors. Treasury yields dropped before rebounding slightly to end the week. Oil hit a 6-year high on Tuesday before dropping off, and the U.S. Dollar showed continued signs of strengthening before falling to end the week.

Economic outlook

The global COVID death count exceeded 4 million on Wednesday as the Delta COVID-19 variant continues to move rapidly around the globe. The biggest news came from Japan, which declared a state of emergency and forced the IOC to pull the plug on any spectators attending the Olympic games in Tokyo, scheduled to begin next Friday. Pfizer announced on Thursday that it is currently developing a COVID-19 booster shot to target the Delta variant, stating their belief that a third booster shot will be needed within 12 months.

The FOMC minutes from the Federal Reserve’s June meeting showed talk of tapering but, ultimately, a push for patience in the recovery effort. Several Fed members indicated the recovery was moving along faster than anticipated. However, the over-riding sentiment was not to rush and to ensure the market is prepared for any shift in Fed policy. Some Federal Reserve officials think it’s time to discuss tapering policy, allowing plenty of time for the market to digest the policy before it is implemented. Both the DOW and the S&P fell mid-week amidst concerns for economic recovery, before recovering those losses on Friday to close the week strong.

(Related insight: Register for the “Semiannual Market Update for Corporations” webinar with Amol Dhargalkar and Kevin Jones)

Interest rates

Treasury yields fell rapidly before rebounding on Friday as markets showed concern for a slowing economic recovery. The 10-year treasury dropped as low as 1.25% on Thursday before recovering slightly to end the week. A combination of weaker-than-expected economic data and the Fed showing signs of patience contributed to this response. Weekly jobless claims plateaued, after dropping rapidly through the beginning of June, coming in at 373K this week. Expectations for initial jobless claims were 350K. With the drop in rates last week, many corporations with expected fixed-rate debt issuances are seeking to lock in their long-term exposure in the current market.

(Related insight: Read "Managing interest rate risk on future debt issuances")


Oil prices remained volatile amidst conflicting news reports. Oil hit a six-year high on Tuesday at $76.98 per barrel. Those highs quickly faded as OPEC+ remained in a standoff over a disagreement on production levels for the rest of the year. Brent futures fell by as much as 5% as Saudi Arabia and the United Arab Emirates remained at an impasse. Oil rebounded slightly on Thursday and Friday after the U.S. government released a report that showed demand increases, coupled with a drop in supply.

Foreign currency

The European Central Bank raised its inflation target rate last week, saying it will target inflation of 2% instead of “close to but below 2%.” EUR jumped following this announcement after the dollar strengthened early in the week. Investors had been moving toward the dollar on the back of a more hawkish stance from the Federal Reserve, but a higher inflation target from the ECB shifted investors towards EUR.

(Related insight: Read the article, "Operational FX hedging programs and the one leading practice you can't afford to ignore")

Looking ahead

The market will keep a close eye on CPI numbers scheduled to come out on Tuesday. The current expectation is for 0.5% month-over-month growth and 5.0% year-over-year growth. Later in the week, the market will continue to monitor the job market with jobless claims on Thursday, as well as retail sales and consumer sentiment scheduled for release on Friday.

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About the author


Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit

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