Renewed stress in the banking system led to a rate rally in the early days of February. However, the market quickly interpreted the issues at New York Community Bancorp to be idiosyncratic and refocused on strong macroeconomic data. The 10-year Treasury yield rose by 30 basis points (bps), ending the month at 4.25%. The yield curve further inverted between the two- and 10-year rate, as the front end rose, pricing in fewer rate cuts.

Employment data came in materially above expectations, with 353k jobs added in January versus 185k expected and there was an upward revision in the two preceding months. Hourly earnings accelerated from 4.1% to 4.6% year-on-year, keeping wage inflation well above what the FOMC would consider sustainable.

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