Daily Market Color March 14, 2017Treasurys Advance Ahead of FOMC Decision as Oil, Stocks Slide Producer price data highlighted the economic releases today, reporting a 0.3% rise in the PPI last month, which exceeded expectations of +0.1%. Year-on-year, US producer prices advanced the most in nearly five years at 2.2%. As has been the trend in recent months, a rise in energy prices served as the main contributor to the headline figure while an increase in service costs, notably hotel accommodation, also boosted prices. Today’s numbers paint a picture of firming inflation pressure within the US economy, with more data due tomorrow with the release of the Labor Department’s consumer price report. Coupled with a tightening labor market, the price data would appear to further validate an increased pace of Fed rate hikes ahead of tomorrow’s FOMC decision. Crude oil prices shed an additional 2% on the day after markets learned of an output increase by Saudi Arabia last month, contradicting previous estimates. A source from Riyadh informed OPEC of the nation’s 263,300 barrels a day boost in production during February, accounting for a reversal of roughly a third of previous cuts implemented. While the now current 10.011 million barrels a day output remains below the level agreed upon in the January pact and represents the largest curbing amongst all OPEC members, the news sparked concerns regarding Saudi Energy Minister Khalid Al-Falih’s comments last week in which he expressed uncertainty with regard to the extension of the cuts and warned of his country’s unwillingness to “bear the burden of free riders.” A barrel of WTI crude is currently trading at $47.40 while Brent crude has fallen to $50.50, both at their lowest levels since November 2016. Treasurys rallied while equities drifted lower in today’s trading session that featured light volumes, as blizzard-like conditions blanketed much of the northeast. Treasury yields/swap rates are currently down 1-4 bps across the curve, with the yield on the 10-year note falling more than 3 basis points to 2.59%. All three major US stock indices have declined 0.25%-0.35% on the day, weighed down largely by energy stocks. The US dollar edged higher, up 0.1% against a basket of major currencies.