Correspondent Blog

PCE Inflation for May Comes in Cool, Keeping Alive Hopes for a September Cut The highly anticipated core PCE inflation reading for May came in at 0.1% (0.08% unrounded), matching expectations, and bringing the YoY rate down to 2.6% from 2.8%, also as expected and the lowest in three years. Meanwhile, the 3-month annualized rate…

Market Waiting on Friday’s PCE Inflation and Spending Numbers An upside surprise in Australian CPI (4.0% vs. 3.6% prior) has global sovereign yields higher and Treasuries are no exception, but some of the upward move is also consolidation of the recent rally. A 5yr note auction this afternoon ($70bn) will also weigh on the market,…

More Housing Numbers and Treasury Supply This Week Treasuries are sharply unchanged as the week opens which includes another dose of supply. 2yr ($69bn), 5yr ($70bn), and 7yr ($44bn) note auctions will take place this week which should keep any rally attempts on a short leash. Last week’s longer duration auctions were generally well received,…

More Weak Reports Yet the Fed Stays Hawkish Treasuries are heading into the weekend with slightly lower yields as European PMI’s were mostly lower than expected. Yields are near the low end of the range that has developed post-CPI and PPI. US data is due later this morning, but S&P Global preliminary June PMIs and…

Retail Sales and Plenty of Fed Speak Highlight This Week Treasuries are opening the week with higher yields as a bounty of corporate supply is providing some hedging pressure. There is also some consolidation happening after the rally that has been the story for most of June. Recall, the 10yr Treasury was yielding 4.61% back…

Maybe the Fed Would Like a Do-Over on its Latest Forecast? The cool May CPI report on Wednesday was followed by a cool PPI report yesterday, which will most likely provide a favorable PCE read later this month, and that has Treasury yields continuing to drift lower. One last inflation report came this morning, and…

Meeting Highlights  Well, the 25 or 50bps rate cut debate has been settled with the Fed cutting the funds rate by 50bps moving the target rate range to 4.75% – 5.00%.  The updated 2024 rate forecast, or dot plot, now sees nearly another 50bps in rate cuts in 2024 ending the year at 4.375%. That…

Goldilocks Inflation Report Greets the Fed A Goldilocks inflation report has Treasuries rallying as it puts a September rate cut back on the table which should be confirmed when we see the updated dot plots later this afternoon. We go into more detail below on the May CPI report but suffice it to say it…

FOMC and CPI Share This Week’s Spotlight Treasury yields are higher as they trade in sympathy with higher European yields as incumbent parties in Europe suffered weekend election losses as far-right politicians gained, and that unsettled euro markets. More Treasury supply this week will also keep Treasuries on the back foot, and of course, Wednesday’s…

May Jobs Report Beats Expectations, but With Conflicting Signals Nonfarm payroll gains for May were 272 thousand vs. 185 thousand expected and 165 thousand in April (revised down from an initial 175 thousand). March was revised lower by 5 thousand jobs, and that continues a year-long trend of downward revisions. The gain in May jobs…

Softer May Data Providing a Continuing Treasury Bid Treasuries are finding more bids as a string of softish reports so far this week have traders expecting more of the same with today’s data. ADP already reported private sector job growth below expectations, but the ISM Services report for May awaits at 10am ET. Currently, the…

May Jobs Report Headlines Busy Week of Data Treasuries are rallying in sympathy to lower bond yields in Europe as the ECB readies an expected 25bp rate cut this week, despite the latest inflation numbers that were a bit hotter-than-expected. The lack of new supply this week is probably helping bids as well, but the…