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Early Volatility After Core-CPI Miss, Rental Inflation Rise

US TSYS
  • Treasuries are looking mostly higher after the bell -- very near the middle of this morning's wide post-data range. Curves twist flatter, however, with short end rates underperforming as projected rate cut pricing gradually cooled post-CPI.
  • Early volatility: Treasury futures gapped higher - extended highs after the modest miss on a core CPI unrounded basis and Y/Y also missing. Tsy Sep'24 10Y traded up to 114-02 high -- nearly breaching technical resistance at 114-03/115-03+ (High Aug 6 / 5 and the bull trigger).
  • Futures quickly reversed lower/extending session low to 113-13.5 as markets focused on above-expected including core services (+0.32%), OER and Rents. The reversal didn't last long, however, futures recovering to near midrange as rental inflation deemed more localized.
  • Earlier data, MBA composite mortgage applications jumped a seasonally adjusted 16.8% last week. It was again driven by particularly strong refinancing activity (34.5% after 16%) which has jumped higher on the almost 50bp decline in 30Y mortgage rates over the past month (although the rate only dipped 1bp to 6.54% in the latest week).
  • Short end rates finish weaker as CPI raises the bar for 50bp cut in Sep. Current projected rate cuts vs. early morning levels (*) post-CPI: Sep'24 cumulative -37.2bp (-39.7bp), Nov'24 cumulative -72.4bp (-74.2bp), Dec'24 -106.2bp (-108.1bp).
  • Looking ahead, deluge of early data Thursday includes Weekly Claims, Retail Sales, Import/Export Prices, IP and Cap-U.
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