Free Trial

CPI Inflation Metric Cools, PPI Up Next

US TSYS
  • Treasury futures have traded sideways since noon after extending highs in the hours following lower than expected June CPI: MoM (0.2% vs. 0.3% est), YoY (3.0% vs. 3.1% est); Ex Food and Energy MoM (0.2% vs. 0.3% est), YoY (4.8% vs. 5.0% est).
  • Traders debated whether it's a trend shift or a one-off move as a proportion of volatile categories (lodging, airfare and used cars) accounted for the slow-down in core inflation.
  • Some moderately hawkish Fed speak from Barkin ("comfortable with more hikes") and Kashkari ("entrenched inflation could prompt Fed to hike further") did little to stem the post-data rally. Reminder, Fed goes into policy blackout this Friday at midnight.
  • Cross asset summary: Equities are in the green but off high (SPX eminis +33.0 at 4506.5), US$ index broadly lower (DXY -1.208 at 100.524). Curves steeper but well off highs after some late block selling in 2s. Currently, 2s10s +2.798 at -88.096 vs. -83.371 high) compares to 40+ year inverted low of -111.0 tapped in March.
  • Short end rally saw projected rate hike by year end recede slightly: July 26 FOMC is 89% w/ implied rate of +22.2bp to 5.298%. September cumulative of 26.2bp vs. +28bp earlier at 5.338%, November cumulative of 30.9 vs 35bp at 5.425%, December cumulative 25.3 vs. 30bp at 5.380%.
  • Treasury futures slip off highs briefly, rebound after the $32B 10Y note auction re-open (91282CHC8) tails: 3.857% high yield vs. 3.850% WI; 2.53x bid-to-cover vs. 2.36x prior
  • Focus turns to Thursday's weekly claims and June PPI.

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.