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US TSYS: Curves Reverse Course After In-Line October CPI, Supercore Softer

US TSYS
USGlobalBulletMarketsFixed Income BulletsRegionNorth America
  • Treasuries reversed course early Wednesday as in-line October CPI inflation data rekindled dovish policy expectations into early 2025. Curves twisted steeper, 2s10s bouncing off early low of 5.586 to 16.573 (+8.254) in late trade.
  • Tsy Dec'24 10Y futures are currently steady at 109-13.5 in late trade after initially climbing to 109-30.5 high this morning. Short end rates outperformed as projected rate cuts into early 2025 gained vs. early Wednesday levels (*) : Dec'24 cumulative -20.6bp (-15.5bp), Jan'25 -29.1bp (-23.0bp), Mar'25 -43.5bp (-35.1bp), May'25 -50.4bp (-41.3bp).
  • Core CPI was exactly as expected at 0.35%, and basically unchanged from September (0.35%). However, supercore (core services ex housing) came in on the soft side at 0.31% vs 0.39% expected, 0.40% prior. While most of the contributions to PCE come from the CPI report, the bulk of the remainder (including healthcare services, airfares, and portfolio mgmt) will come from Thu's PPI report.
  • More Fed speak: St. Louis Fed President Alberto Musalem said Wednesday he supports further interest rate cuts if inflation keeps falling, but added the risks that it doesn't have risen even as the labor market stays healthy.
  • Dallas Fed Logan on said the central bank will most likely need more rate cuts to finish the journey to sustainably deliver both maximum employment and stable prices, but it’s difficult to be sure how many cuts may be needed and how soon they may need to happen.
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  • Treasuries reversed course early Wednesday as in-line October CPI inflation data rekindled dovish policy expectations into early 2025. Curves twisted steeper, 2s10s bouncing off early low of 5.586 to 16.573 (+8.254) in late trade.
  • Tsy Dec'24 10Y futures are currently steady at 109-13.5 in late trade after initially climbing to 109-30.5 high this morning. Short end rates outperformed as projected rate cuts into early 2025 gained vs. early Wednesday levels (*) : Dec'24 cumulative -20.6bp (-15.5bp), Jan'25 -29.1bp (-23.0bp), Mar'25 -43.5bp (-35.1bp), May'25 -50.4bp (-41.3bp).
  • Core CPI was exactly as expected at 0.35%, and basically unchanged from September (0.35%). However, supercore (core services ex housing) came in on the soft side at 0.31% vs 0.39% expected, 0.40% prior. While most of the contributions to PCE come from the CPI report, the bulk of the remainder (including healthcare services, airfares, and portfolio mgmt) will come from Thu's PPI report.
  • More Fed speak: St. Louis Fed President Alberto Musalem said Wednesday he supports further interest rate cuts if inflation keeps falling, but added the risks that it doesn't have risen even as the labor market stays healthy.
  • Dallas Fed Logan on said the central bank will most likely need more rate cuts to finish the journey to sustainably deliver both maximum employment and stable prices, but it’s difficult to be sure how many cuts may be needed and how soon they may need to happen.