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US TSYS: Rise in Core/Supercore CPI, But Wait Until Thursday's PPI: Powell

US TSYS
USBulletMarketsFixed Income BulletsNorth America
  • Treasuries gapped lower after unexpected rise in January Core/Supercore CPI inflation data Wednesday, 10Y yield climbing to 4.6576% high on heavy volumes.
  • Fed chair Powell cautions against getting "excited" about today's CPI report ahead of PPI (Thursday 0830ET), reminding that the latter report carries potentially different implications for the Fed's preferred PCE gauge: "The CPI reading was above almost every forecast.
  • Treasury Mar'25 10Y futures trade 108-09 (-21.5) after the bell, above initial technical support at 108-00 (Low Jan 16); curves mixed: 2s10s +2.413 at 26.981, 5s30s -1.858 at 35.507. Tsy 10Y auction didn't help matters as the new supply tailed: drawing 4.632% high yield vs. 4.622% WI; 2.48x bid-to-cover vs. 2.53x prior.
  • Nevertheless, projected rate cuts through mid-2025 continue to recede vs. this morning's pre-CPI levels (*) as follows: Mar'25 at -0.5bp (-0.7bp), May'25 at -3.2bp (-6.3bp), Jun'25 at -9.1bp (-13.9bp), Jul'25 at -12.6bp (-18.9bp).
  • Weaker yen, with EURJPY’s 1.85% rally particularly standing out. Price dynamics kickstarted across the APAC session but were then bolstered by a hotter-than-expected US CPI report.
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  • Treasuries gapped lower after unexpected rise in January Core/Supercore CPI inflation data Wednesday, 10Y yield climbing to 4.6576% high on heavy volumes.
  • Fed chair Powell cautions against getting "excited" about today's CPI report ahead of PPI (Thursday 0830ET), reminding that the latter report carries potentially different implications for the Fed's preferred PCE gauge: "The CPI reading was above almost every forecast.
  • Treasury Mar'25 10Y futures trade 108-09 (-21.5) after the bell, above initial technical support at 108-00 (Low Jan 16); curves mixed: 2s10s +2.413 at 26.981, 5s30s -1.858 at 35.507. Tsy 10Y auction didn't help matters as the new supply tailed: drawing 4.632% high yield vs. 4.622% WI; 2.48x bid-to-cover vs. 2.53x prior.
  • Nevertheless, projected rate cuts through mid-2025 continue to recede vs. this morning's pre-CPI levels (*) as follows: Mar'25 at -0.5bp (-0.7bp), May'25 at -3.2bp (-6.3bp), Jun'25 at -9.1bp (-13.9bp), Jul'25 at -12.6bp (-18.9bp).
  • Weaker yen, with EURJPY’s 1.85% rally particularly standing out. Price dynamics kickstarted across the APAC session but were then bolstered by a hotter-than-expected US CPI report.