Free Trial

Hot CPI and Hawkish Pivot From StL Fed Bullard

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%.

To read the full story



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.