March 2022 Economic Update

Tensions (and Everything Else) Rise

March 11, 2022


Public Trust Trading Desk

On February 24, Russia invaded the eastern border of Ukraine. As resulting sanctions severely and adversely affect Russia, most commodity prices, particularly oil, approach historic highs. The price of Brent crude oil surpassed $130/bbl, the highest since July 2008. Crude oil prices doubled in 1973-74, 1978, and 2007-2008, all preceding an impending recession. If crude oil sustains its ~$20 elevated shock, Wall Street analysts are projecting a 0.6% and 0.3% drop in the Euro-area GDP and in the U.S GDP, respectively. Wheat is also approaching its all-time high price as Ukraine, one of the top global wheat suppliers, faces several production challenges given the developing conflicts.

The shorter tenors of the yield curve are experiencing an upward shift compared to the previous month which coincides with a flattening in longer durations as investors are avoiding reinvestment risk. With equity markets and high-yield investments proving to be increasingly volatile, investors are making a flight to quality. Commercial paper markets have seen a material uptick in yield from the previous period as well, jumping as high as 50 bps on an issuer-specific level with the highest average maturity being 6-month CP above 35 bps to Treasuries.

Inflation has been steadily increasing and is up 7.5% YoY. Unemployment in the U.S. is only 30 bps above the pre-COVID level; however, the labor participation rate is significantly below pre-COVID levels as many people fled the job market (often referred to as the Great Resignation). As the world continues to face supply chain disruptions and shocking commodity prices, CPI readings are expected to continue the upward trend. Chair Jerome Powell has alluded to the fact that rate hikes will be in order starting with the FOMC meeting on March 16. In February, the market had priced in nearly two rate hikes at the coming meeting but with the ominous and accelerating conflicts in Eastern Europe, the market is pricing in just under one rate hike in March

On February 24, Russia invaded the eastern border of Ukraine. As resulting sanctions severely and adversely affect…

Current Economic Releases

GDP QoQQ4 ’217.00%
US UnemploymentFeb ’223.80%
ISM ManufacturingFeb ’2258.60
PPI YoYJan ’2212.20%
CPI YoYJan ’227.50%
Fed Funds TargetMarch 11, 20220.00% – 0.25%

Treasury Yields


Agency Yields


Commercial Paper (A1/P1)



Source: Bloomberg. Data unaudited. Many factors affect performance including changes in market conditions and interest rates and in response to other economic, political, or financial developments. Investment involves risk, including the possible loss of principal. No assurance can be given that the performance objectives of a given strategy will be achieved. All comments and discussions presented are purely based on opinion and assumptions, not fact. These assumptions may or may not be correct based on foreseen and unforeseen events. The information above is not a recommendation to buy, sell, implement, or change any securities or investment strategy, function, or process. Any financial and/or investment decision should be made only after considerable research, consideration, and involvement with an experienced professional engaged for the specific purpose. Past performance is not an indication of future performance. Any financial and/or investment decision may incur losses.

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