IGA Capital Weekly Economic Update

April 21, 2025

Macroeconomic Overview

The economic landscape remains centered on Federal Reserve policy expectations, with markets pricing in a series of rate cuts through 2025. The Fed Funds futures curve implies a policy rate of 3.46% by December 2025, down from the current 4.33%, as inflation trends lower and growth moderates.

• Core CPI YoY: 2.40% (down from 2.80% last month)

• Fed Funds Effective Rate: 4.33%

• 10-Year UST Yield: 4.34% (up 9 bps from last month)

• 1M Term SOFR: 4.32% (flat month-over-month)

Inflation continues its gradual retreat across most major economies, with the U.S., Eurozone, and Canada showing consistent downward CPI trends. The inflation breakeven remains stable, supporting expectations of easing rate policy without immediate recession fears.

Bond Market Update

The U.S. Treasury market remains sensitive to evolving rate cut expectations:

• Median 10-Year UST Forecast (Q4 2025): 4.25%

• Forward Curve Pricing: Reflects lower yields across 5Y, 7Y, and 10Y maturities, consistent with easing bias.

• Yield Curve Slope (2s/10s Spread): +0.60% (YTD steepening by 28 bps)

Swap spreads narrowed further across tenors, signaling continued normalization in liquidity premiums.

High-yield corporate bonds and long-duration treasuries posted the weakest total return performance over the past month, while short-term money market instruments remained stable.

Equity & Commodity Markets

U.S. equities experienced notable drawdowns amidst macro volatility:

• S&P 500: -6.2% (1-month), remains up 27.8% YoY

• Dow Jones: -6.3% (1-month), +15.8% YoY

• Nasdaq: -7.0% (1-month), +35.2% YoY

Gold surged to $3,394/oz (+11.5% month-over-month), reflecting heightened demand for safe-haven assets amid geopolitical concerns and rate volatility. Oil prices declined sharply to $62.78/barrel (-8.1%), driven by supply-demand rebalancing and global growth concerns.

Real estate sectors remain under pressure, particularly mortgage REITs and homebuilders, as refinancing risks persist in a high-rate environment.

Key Market Focus This Week

• U.S. Durable Goods Orders (April 24)

• S&P Global US Manufacturing and Services PMI (April 23)

• New Home Sales and Beige Book Release (April 23)

• GDP & Inflation Figures from Eurozone and Canada

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