CPI Deflation

Tsys well bid but off post data highs after the bell - near middle of wide session range on decent volumes (TYH3>1.7M).

• FI markets gap bid after lower than expected Nov CPI (0.1% vs. 0.3% est, core 0.2%) spurred hopes of a continued slowdown in Fed hikes in 2023 (Fed voters have until this evening to revise projections).
• Still Expecting 50Bp Hike tomorrow while mid-'23 Terminal Dips - Fed funds implied hike for Dec'22 back to 51.2bp, while Feb'23 cumulative currently 84.9bp (91.5bp earlier) to 4.674%, Mar'23 98.7bp (108.0bp earlier) to 4.813%, while Fed terminal rate for May'23-Jun'23 falls to 4.845% vs. 4.97% pre-data.
• Yield curves bull steepened (2s10s +4.943 at -72.493 late vs. -69.622 low) as core goods deflation accelerated, falling 0.5% in the month and its weakest since April 2020. Core services inflation also slowed to 0.4%, a still-robust print but one that's a four-month low.
• Heavy volumes in the well bid SOFR futures (far outpacing Eurodollar futures), w/ Reds (SFRZ3-SFRU4) trading +0.240-0.195 higher.
• Tys pare gains after $18B 30Y auction reopen (912810TL2) 3.1bp tails: 3.513% high yield vs. 3.482% WI; 2.25x bid-to-cover vs. 2.42x prior month.