Inflation, via this morning's PCE price index, came in slightly hotter than expected, but bonds are rallying in response. There are a few ways to approach this paradox both in the long and short term.  On a more nitty gritty level, the unrounded PCE numbers were fairly close to consensus and that can always help mitigate unfriendly data. In the bigger picture, we can consider a few other factors. On a data-related note, annual PCE (non-core) stayed at 2.5% vs 2.5%--not too terrible considering a 2.0% target. Data aside, we can also consider the gap that we've discussed several times this week and the fact that bonds could simply be rallying because it was finally filled yesterday.