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What to Watch: Aug CPI, Unlikely to Change Fed's Mind Next Wk

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Tsys firmer, top end overnight range and back near middle of Monday's range (30YY currently 3.4707% (-.0414). Moderate overnight volumes (TYZ2<240k) as market awaits latest inflation metric covering August, CPI release at 0830ET:
    • CPI MoM (0.0%, -0.1%); YoY 8.5%, 8.1%)
    • CPI Ex Food and Energy MoM (0.3%, 0.3%); YoY (5.9%, 6.1%)
    • CPI Index NSA (296.276, 295.588), Core (295.275, 296.250)
    • Real Avg Hourly Earning YoY (-3.0%, --), followed by
    • Monthly Budget Statement (-$211.1B, -$217.0B) at 1400ET
  • Outlook/Opinion: Citi see core CPI inflation at 0.357% M/M and headline -0.1% M/M in August. At this point, even a weaker reading (e.g., a large decline in used-car prices delivering closer to zero monthly core inflation) could still be consistent with a 75bp hike on Sep 21 after Brainard suggested it would take "several" (more than two) months of softer inflation data to convince her that inflation has slowed.
  • US Treasury $18B 30Y Bond auction re-open (912810TJ7) at 1300ET will be watched closely after Mon's 3- and 10Y sales tailed.
  • Geopol: Armenia/Azerbaijan Skirmishes, Escalation Risk w/Russia Distracted: Fighting has broken out on the border between Armenia and Azerbaijan in the Caucuses, with Armenian PM Nikol Pashinyan confirming the death of 49 of his troops. Following skirmishes between Armenia and Azerbaijan, Kremlin states that 'Putin is doing all he can to enable de-escalation' between the two countries.

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