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Hot CPI and Hawkish Pivot From StL Fed Bullard

US TSYS SUMMARY
Tsy yields surged back to mid-May levels (30YY 2.3436%) after Jan CPI came out higher than estimates at 0.6% Thu, yield curves bear flattened (2s10s slipped below 43.0, finishing around 43.8 -13.4; 7s10s inverted) while equities fell below 4500.0 after climbing back above 50-day EMA of4564.03 around midday.
  • One-Two Punch: The "hot" CPI got "higher/faster" rate hike ball rolling early but hawkish pivot from StL Fed Bullard hammered the point home.
  • In a Bbg interview -- ahead the 30Y auction to boot -- Fed Bullard green-lighted a 50bp hike in March (but defers to Powell on move) and potential for inter-meeting hikes in light of the pick-up in inflation. (Remember, Bullard stated a 50bp hike "didn't help us" a week ago).
  • Of note, 2YY currently at 1.5827% well above where 10YY started the year (1.5360%).
  • Not kind to Bond auction: Tys whipsawed after $23B 30Y auction tail (912810TD0), Bond sale tailed on 2.340% high yield vs. 2.327% WI; 2.30x bid-to-cover vs. 2.35x last month (2.29x 5-month average).
  • Counterpoint: MNI INTERVIEW: Fed's Daly Downplays Chances Of 50 BP Rate Hike, interview AFTER CPI. Still on tap: Richmond Fed Barkin (hawk) this evening at 1900ET.
  • Heavy volumes, real-vol spiked, heavy Eurodlr and Treasury option volumes chasing renewed rate hike pricing (as much as 150bp by year end).
  • After the bell, 2-Yr yield is up 24.5bps at 1.6092%, 5-Yr is up 14.6bps at 1.9624%, 10-Yr is up 10.4bps at 2.0451%, and 30-Yr is up 8.2bps at 2.3272%.
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