CPI Lived Up To Market Moving Potential And Then Some

For every 14 or 15 times we approach a potential big-ticket market mover with a high degree of anticipation, days like today happen.  In fact, it might be even more rare than that because bonds reacted even more forcefully than the data suggested.  Case in point, Core M/M CPI came in at 0.2 vs 0.2 forecast and 10yr yields quickly dropped by 15bps and never rebounded.  That’s quite something and it either emphasizes the market’s anxiety about getting hit with a double whammy today (after Friday’s jobs report), the favorable composition of the data’s internal components, or the fact that corrections are bigger than they otherwise would be when they follow long-term high yields.  The truth is likely a mix of all 3 factors.  No one’s complaining, but do keep in mind that this can’t singlehandedly change the narrative, even if it can serve as an ingredient in that change.

Econ Data / Events

Monthly Core CPI

0.2 vs 0.2 f’cast, 0.3 prev
unrounded: 0.225 vs 0.240

Annual Core CPI

3.2 vs 3.3 f’cast, 3.3 prev

Market Movement Recap

09:11 AM stronger overnight with additional gains after CPI data.  MBS up half a point and 10yr down 12.3bps at 4.678

12:18 PM Gains holding up nicely.  MBS up 18 ticks (.56) and 10yr down 14bps at 4.661

04:44 PM Remarkable absence of volatility following such a big move in the morning.  MBS up 19 ticks (.59) and 10yr down 14.8bps at 4.655… very little changed for the past 5 hours.