CPI Continues to Moderate

Tsys futures firmer across the board, trading sideways after extending session highs following decent 30Y Bond auction re-open: 2.2bp tail: 3.585% high yield vs. 3.607% WI; 2.45x bid-to-cover vs. 2.25x prior month.

• Post CPI-data volatility saw futures initially gap lower (30YY tapped 3.7201% high), reversing move nearly as quickly on in-line CPI read. U.S. price pressures continued to moderate in December as CPI fell 0.1% in the month and core CPI rose 0.3%, bringing the year-over-year rates to 6.5% and 5.7%, respectively, and matching market expectations.
• Headline CPI hit its lowest since October 2021 and should keep the Federal Reserve on track to end rate hikes early this year.
• Yield curves see-sawed off early lows but finished flatter. Fed speak: Philly Fed President Patrick Harker said Thursday that few more quarter-point increases this year should bring the Federal Reserve's benchmark overnight interest rate to a sufficiently high level to slow the economy and inflation.
• Discounting Fed Bullard: favors getting to above 5% rates as soon as possible but it may not be critical how the Fed gets rates to destination. Will need to keep rates high enough to cool prices. Fed Barkin reiterated Fed still has work to do to contain high inflation.