A Little Weaker Following Data

Tsys see a shallow sell off following the release of the PCE data suite, with marginally firmer-than-expected personal income readings seemingly applying modest pressure.

• TY futures retest yesterday’s low, yields are 1-4bp higher on the day.
• Light bear flattening seen ahead of the data holds.
• The unrounded core PCE M/M reading was essentially in line with sell-side estimates (+0.16% vs. the +0.15% median derived from notes we had seen).
• The core Y/Y PCE reading was 0.1ppt below expectations, printing at +2.6%. Our data preview noted that there was a good chance of a downside ‘surprise’ after the Q2 revisions.
• We also noted that any optical movement in that figure was likely to be exaggerated by rounding.
• The lack of meaningful deviation in the data vs. wider expectations explains the limited move in markets.
• Next week’s labor market data is set to be of far greater importance, given the increased Fed focus on that side of its mandate.