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Markets Roundup: Post-CPI, STIR'd Not Shaken

US TSYS
  • Treasury futures have scaled back from recent session highs (10s +26.5 at 112-03 vs. 112-05 high), after this morning's June CPI came out lower than expected: 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).
  • On the the disinflationary metric, market participants debating 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, though Atlanta Fed Bostic (1300ET) and Cleveland Fed Mester (1600ET) have yet to throw their hat's in the ring. reminder, Fed goes into policy blackout this Friday at midnight.
  • Cross asset summary: Equities holding near highs (SPX eminis +45.5 at 4519.0), US$ index broadly lower (DXY -1.109 at 100.623). Curves steeper (2s10s +5.062 at -85.832 vs. -83.371) compares to 40+ year inverted low of -111.0 tapped in March.
  • Short end rally sees 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%. Fed terminal holding at 5.43% in Nov'23.
  • In the meantime, traders gear up for the Tsy $32B 10Y note auction reopen at 1300ET.
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