Our DM Team On Why Bonds Are Richer Post-U.S. CPI?

The most common question seen by our DM team over the last 12 hours or so is why are bonds richer post-U.S. CPI? They highlight several factors:

1. Comments from the usually hawkish ECB Governing Council member Vujcic at an MNI event. He noted that he would prefer to cut rates in 25bp steps (when the time comes), but didn’t rule out 50bp moves, while stressing that the Bank is data-dependent.
2. Geopolitical tensions surrounding the Middle East, with air strikes led by the U.S. & UK hitting Houthi-related targets in Yemen overnight. The Houthis have vowed to expand their response “soon.”
3. Expectations for a more dovish U.S. PCE reading (compared to CPI), we will know more about that later today, post-U.S. PPI.
4. Richmond Fed President Barkin (’24 voter) sounding a little more dovish than he has at various junctures in the past.
5. A relatively well-received round of 30-Year U.S. Tsy supply.
6. Flow support via a large FV futures block in NY hours.