Core CPI Jumps 0.6%, Underscores Near-Term Rate Hikes

Tsys futures finish mostly higher, well off initial post data lows curves bull flattened (2s10s -9.665 at 27.771) as bonds discounted the April CPI inflation data: up 0.3% m/m in April and 8.3% y/y, Core CPI jumped 0.6% m/m and 6.2% y/y, a slowing from 6.5% last month.

• Short end weaker - anchored as additional three 50bp rate hikes gets baked in (chance of 75bp hike in near term back in realm of possibility. Nevertheless, analysts anticipate inflation softening in the coming months.
• Tsy futures holding near session highs but scaling back support slightly after $36B 10Y note auction (91282CEP2) tails: 2.943% high yield vs. 2.925% WI; 2.49x bid-to-cover off last month's 2.43x.
• Indirect take-up climbs to 70.30% vs. last month's 64.33% high; direct bidder take-up at 18.21 from 17.02%, while primary dealer take-up falls to 11.49% vs. 18.66%.
• Meanwhile, the U.S. Treasury said it posted a record budget surplus of USD308 billion in April, fueled by record tax receipts and lower outlays, versus a budget deficit of USD226 billion in the same month one year earlier.
• The fiscal year-to-date budget deficit was USD360 billion, following a record USD1.9 trillion deficit in the same period a year earlier, the Treasury said.
• Thursday focus on PPI Final Demand MoM (1.4% prior, 0.5% est); YoY (11.2%, 10.7%), weekly claims (192k) and $22B 30Y Bond auction (912810TG3)