Baker Market Update 2026-02-27

The 2026 Winter Olympics ended this past Sunday, with Norway leading the podium at 41 total medals, followed by the United States with 33 and Sweden with 20. The 2026 edition of the Winter Olympics was held in Milan-Cortina, in northern Italy, and the final event that concluded this series of competitions was men's ice hockey, a sport that historically speaking is dominated by our northern neighbor, Canada. The men's Canadian team faced off against our very own United States men's team. Unfortunately, for the Canadians their historical dominance in men’s hockey did not stand the test of time, and they were dealt a crushing defeat when our forward Jack Hughes scored the decisive game-ending goal in overtime. The last time Canada won an Olympic gold medal in men’s hockey was in the 2014 Sochi Games, leaving fans around the world with one question in mind: "Is this the end of Canadian global dominance and the beginning of a new regime?"

This morning, we received the Producer Price Index (PPI), which measures changes in production costs for domestic producers. The headline reading for January came in hotter than expected, with PPI MoM rising +0.5% versus an expected +0.3% and a prior month value of +0.4%. At first glance, this surprise to the upside is a setback for those hoping to see continued disinflationary momentum at the producer level. However, a closer look reveals that the overshoot was largely driven by a jump in the services component, while most tangible goods were flat or slightly lower relative to the December print. In other words, the broader producer supply chain appears to be on the desired path toward steadier price levels, with the overshoot concentrated in services, an area that continues to prove sticky and warrants closer attention going forward.

Despite the upside surprise in producer prices, the bond market remained unfazed. The ten-year rally that began in early February at a yield of 4.27% continued to gain ground, with yields breaking below the 4% threshold, a move representing a +27 basis point rally from earlier in the month. This week also presented us with good news for other segments of U.S. Treasury notes. On Thursday the 26th, new supply of the 7-year U.S. Treasury Note was brought to market. While the overall results came in largely as expected, or "on the screws" in auction terminology, one figure did stand out when compared to previous auctions of the same tenor. International participants were awarded their highest share since August of last year, suggesting that foreign appetite for U.S. government debt may be growing following the recent strike down of tariffs enacted by the Trump Administration.

A new month begins next week, bringing with it the usual slate of important labor market releases that will help shape the outlook for rates and the economy.