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Market Roundup: Volatile Post-CPI Trade, Longer Period of Rate Hikes

US TSYS
Volatile post-CPI trade with hawkish leaning Fed speak pushing rates lower ahead midday. Tsy futures gap lower/extend lows (30YY 3.7888% initial high) after Jan CPI climbed 0.5 percent, seasonally adjusted, +6.4% YoY - not seasonally adjusted. Tsys futures gap higher/extend highs just as quickly (30YY 3.7162% low) as mkts digested seventh consecutive decline for headline YoY CPI.
  • Surge to new session highs post data more flow driven than data or headline, followed shortly after with Block sales in 5s and 10s through respective offers that started Tsys on a path to new session lows by midday.
  • As noted, equities reversed gains too as hawkish Fed speak from Dallas Fed Logan on danger of not hike rates enough to combat inflation tempered risk appetite.
  • Implied rate hikes adapt: -20,000 SFRU3 97.76, sell through 97.77 post-time bid at 1033:28ET, 94.76 last (-0.090). Note, lead SFRH3 holding steady while balance of quarterlies pricing in more rate hikes through year end.
  • Similarly, Fed funds implied hike for Mar'23 slips to 25.4bp (-2.1), May'23 cumulative steady at 46.4bp to 5.048%, Jun'23 62.1bp (+4.2) to 5.205%, terminal climbs to 5.26%-5.265% in Aug'23-Sep'23.
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