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MNI: UNIV OF MICHIGAN CONSUMER SENTIMENT FINAL NOV INDEX 71.8

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MNI US CPI Preview

MACRO CREDIT
  • BBG consensus is for a 0.3% print for MoM Core CPI, firmly skewed towards a ‘low’ reading with an average response of 0.25% M/M, something our survey of analysts with many estimates to 2.d.p broadly confirms. This is lower but close to the November print of 0.285%, implying continued, slow movement towards the 2% target.
  • BBG consensus is for a 0.3% print for MoM Headline CPI with a more balanced distribution of estimates.
  • The predominant implication of today’s print will be on the print’s impact on pricing of a March Fed cut, with any changes potentially impacting front-end pricing of ECB cuts and short-end EGB yields.
  • USTs have this year pared part of their Q4 richening with short-dated bonds 10bp cheaper YTD. An upside beat could reverse this move, flattening the curve and solidifying that the remaining gap to on-target core inflation will require high-for-longer rates, weighing on total credit returns, particularly those positioned towards the short-end of the curve.
  • On the other hand, a downside miss today could see markets moving to more fully price in Fed cuts (17bp priced for March, 140bp for 2024), supporting total credit returns and again for those positioned towards the short-end in particular.
  • We’ve seen analysis of 2023 Core CPI prints pointing to larger moves in USTs on misses compared to beats and given the significant progress on inflation towards target thus far, this may hold true into the future.
  • See out DM team’s full report here: {https://roar-assets-auto.rbl.ms/files/59430/USCPIP...}
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