Inflation worries yielding market nerves
During a cold winter with plenty of snow, a sunny day with temperatures in the upper 30s can feel like spring relief. It still is cold — especially for those of us in South Florida — but the relative warmth can change one’s mood.
Much the same can be said of the bond market and inflation. Interest rates remain historically low, but the cost of borrowing is getting more expensive compared to just a few months ago over worries about future inflation.
Look no further than the cost to borrow money to buy a home.
The average interest rate on a 30-year fixed-rate mortgage popped above 3 percent last week — a six-month high.
Three percent for money today that one pays back over the next three decades is cheap by historic measures, but the mortgage market is simply a reflection of an increasingly nervous bond market.
Inflation is the enemy of bond investors. It eats away at the worth of future interest payments.
Bond investors look for security in knowing they will get their investment back, along with something extra in the form of the interest payment. Inflation rates remain low by historical standards — under 2 percent.
However, expectations of future inflation have been growing.
Worries that inflation will erode the value of bond interest payments has been creeping into the bond market this year, pushing down bond prices and pulling up market interest rates.
The Federal Reserve has been clear in communicating that it will remain patient with inflation should it flare up. It has pledged to keep its target interest rate low for a couple of years.
However, market anxieties can run well ahead of any calming reassurances from the central bank. More people receiving their COVID-19 vaccinations, more stimulus spending by the federal government, and improving consumer confidence have helped feed inflation concerns.
Investors will examine February consumer and wholesale inflation data when they are released on Wednesday and Thursday looking for signs of sustained higher prices.
Nervousness in the bond market rattles the confidence of stock investors. No investor wants to get caught out in the cold.
Rocket Watts scored 21 points and Aaron Henry had 18 Sunday to lead host Michigan State to a 70-64 upset over No. 2 Michigan that could seal coach Tom Izzo’s 23rd consecutive NCAA Tournament bid.
The Spartans (15-11, 9-11 Big Ten) have won five of their last seven games, beating No. 4 Ohio State, No. 5 Illinois and their second-ranked rivals during the late-season surge.
The Wolverines (19-3, 14-3) closed the regular season getting routed at home by the Fighting Illini, beating Michigan State handily to seal the Big Ten title and losing the rematch three days later.
Senior guard Eli Brooks hurt his left ankle early in the game and did not return in what could be a problem going into the Big Ten and NCAA tournaments. Brooks ranks fourth on the team with eightplus points per game, averages nearly three assists a game and has started 51 games over two seasons.
No. 3 Baylor 88, No. 18 Texas Tech 73: MaCio Teague scored 35 points and matched a school record with 10 three-pointers as the Bears (21-1, 13-1 Big 12) finished undefeated at home for the first time in 73 years. Kyler Edwards led Texas Tech (17-9, 9-8) with 18 points.
No. 5 Iowa 77, vs. No. 25 Wisconsin 73: Luka Garza scored 21 points and had 16 rebounds as the host Hawkeyes (20-7,
14-6) defeated the Badgers (16-11, 10-10).
No. 9 Houston
67, Memphis 64: Tramon Mark’s three-pointer at the buzzer lifted the host Cougars (21-3, 14-3 American) past the Tigers (15-7, 11-4).
No. 15 Texas 76, TCU 64: Andrew Jones scored 16 points and the Longhorns (17-7, 11-6 Big 12) beat the Horned Frogs (12-13, 5-11) to finish the regular season with their third straight road victory.
No. 20 Loyola Chicago 75, Drake 65: Cameron Krutwig and Braden Norris scored 20 points apiece to lead the Ramblers (24-4, 16-2) over Drake in the Missouri Valley Conference championship game.
STATE SCHOOLS
Tennessee 65, Florida Victor Bailey Jr., John Fulkerson and Keon Johnson all scored 14 points as the host Volunteers (17-7, 10-7 SEC) rallied from a 14-point deficit to beat the Gators (13-9, 9-7).
WOMEN’S ACC, SEC FINALS
No. 3 North Carolina State 58, No. 5 Louisville 56 Raina Perez hit a jumper with 2.1 seconds left to help the Wolfpack (20-2) beat the Cardinals (23-3) for the championship of the Atlantic Coast Conference Tournament.
No. 7 South Carolina 67, No. 16 Georgia 62: Aliyah Boston had 27 points and 10 rebounds as the Gamecocks (22-4) pulled away in the third quarter to beat the Bulldogs (20-6) for its second straight SEC Tournament title — and sixth in years.