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Yields Higher Despite Dip in Core CPI, PPI Up Next

US TSYS
  • Treasury futures finishing near late session lows after initially gapping to session highs (TYU3 tapped 111-29) following this morning's July CPI: core MoM 0.16% vs. 0.2% est. Core goods deflation accelerated to -0.33% M/M from -0.05% M/M.
  • The drag from used vehicles was at the low end of expectations seen beforehand, at -1.34% M/M vs analysts averaging circa -2% (ranging from -1.3% to -3.2%) after -0.45% M/M. There should be further declines in the pipeline. However, more notable from the goods side was core goods ex used vehicles printing -0.18% M/M after two 0.00% M/M readings.
  • Initial jobless claims disappointed as they surprisingly increased to 248k (cons 230k) after an unrevised 227k, for its largest weekly increase since early June.
  • Fed pricing comes off post-CPI session lows but only just with SF Fed’s Daly (’24 voter) noting the Fed still has more work to do and that the CPI data was largely as expected and that it doesn’t say ‘victory is ours’ on inflation.
  • Daly added the Fed is yet to determine whether to raise and how long to hold rates, with Daly being data dependent and it premature to decide on another hike. There is a lot more info coming in before the September meeting and before year-end.
  • Delayed reaction, Treasury futures traded weaker after $23B 30Y auction (912810TT5) tailed with 4.189% high yield vs. 4.175% WI; 2.42x bid-to-cover vs. 2.43x in the prior month.
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