Yesterday’s came in much hotter than expected, and the impacts were felt throughout the bond market and the complex.
came in at 0.4% – hotter than the 0.3% m/m estimates. Meanwhile, increased by 3.3% much hotter than the estimates for 3.1%. It actually just missed rounding up to 0.5% M/M, printing at 0.4463%.
Headline rose by 0.5% versus 0.3% m/m and by 3% y/y versus the estimate of 2.9%. This will put a lot of emphasis on today’s numbers because those, combined with CPI, will give us an idea of where will be.
Inflation swaps traded higher on the day, with the 2-year CPI Swap easily breaking out, and it appears to be well on its way back to around 2.85% if the current trend stays in place. Of course, tomorrow’s PPI report will have a big say in what happens next.
have jumped sharply, rising about 10 basis points today. Resistance is around 4.65%, but the broader uptrend remains intact. It also looks like that potential head-and-shoulder pattern has failed, reinforcing the bullish trend. If this breakout holds, we could see rates push past 4.80%.
The could break higher toward 4.50% if the PPI is hotter than expected tomorrow. It stopped today at resistance, so one can only imagine what will happen if the data holds up in the coming days.
The yen has broken above its downtrend, and if it surpasses 154.40, it could move toward 156.50. At this point, the follows US 10-year rates, and if those rates move higher, then the USD/JPY will weaken.
The finished the day down by around 30 bps, and it mostly looked like it was a volatility reset that kept the index together. The initially spiked on the CPI report but later faded, contributing to market stabilization and the S&P 500 rebounding. Once the VIX stopped falling, the S&P 500 just went sideways.