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Inflation Keeps on Hitting Records as Bond Yields Rise

The main event of yesterday can undoubtedly be considered the publication of inflationary data from the US (consumer inflation). We already wrote that given the current prices for energy resources, industrial metals and agricultural products, as well as their dynamics (permanent growth) and the dynamics of wages, one cannot count on a reduction in inflationary pressure.

So yesterday's data showed that the problem itself will not resolve. 7.5% annual price growth for the US is something unprecedented. Unseen for a good 40 years. Note that this is even higher than analysts' forecasts, who expected a 7.3% growth.

This news is definitely not in the hands of buyers in the US stock market, if only because the Fed has less and less time and room to maneuver. An increase in the rate in March is already seen as something inevitable and it is quite likely that the rate will be increased not by 0.25%, but immediately by 0.5% (if before the publication of yesterday's data, the probability of this was estimated at about 25%, now it is 92%). And the rise in US Treasury yields (10-year yields have surpassed 2%) makes us wonder if it is worth buying overpriced stocks, exposing ourselves to the risk of a bubble burst, if you can get a guaranteed 2% with formally zero risk.

There are still few sellers on the oil market. This was partly helped by the latest OPEC report, which says that global oil demand will grow by 4.15 million bpd in 2022 after a sharp increase of 5.7 million bpd in 2021. Apparently, the fate of the oil market will be decided at the supply level: will OPEC + continue to increase production further and is this structure really able to increase supply, by how much will the US increase production in 2022 and, finally, will they come to an agreement with Iran, and if so, how much additional oil will be on the market. The fate of oil will depend on the answers to these questions.