If you told the average trader that today's core CPI would come in at 2.6% vs 3.0% year over year, they would have expected a much bigger reaction than we saw today. Ironically, the size of the miss may be one of those reasons. It's so far outside the realm of expected possibilities that traders immediately assumed the presence of legitimate issues with November's data collection. Nonetheless, it was worth a moderate extension of the overnight rally.
Rallying after CPI data. MBS up a quarter point and 10yr down 4.4bps at 4.115
12:18 PM
Off best levels. MBS still up 5 ticks (.16) and 10yr down 3.1bps at 4.127
02:56 PM
MBS up 7 ticks (.22) and 10yr down 4.2bps at 4.117
Lock / Float Considerations
Thursday's CPI data was so far below expectations that bonds hesitated to rally as aggressively as the numbers suggested. Nonetheless, this easily reinforces the ceiling of the recent range and arguably serves as the last true trading day of 2025. Apart from some potential random year-end volatility at the very end of the month, the next risk for consequential volatility from scheduled events won't be until the first week of January.
