Why Aren't Bonds Happier About CPI?
Why Aren't Bonds Happier About CPI?
Today's CPI came in lower than expected. That would normally help bonds rally, but they didn't seem too eager to do that. One explanation is that the components of CPI that have a bearing on PCE suggest PCE will be higher than previously expected. While we don't usually see PCE move markets as much as CPI, that's because PCE is much easier to forecast after CPI and PPI come out. As far as the Fed is concerned, PCE has the final say when it comes to measuring progress toward 2% inflation. As such, if today's CPI says that PCE (2 weeks from now) looks like it will be higher than previously expected, the implication is for bond market weakness as opposed to strength.
Weaker overnight and mixed reaction to CPI (mostly ignored). MBS down 1 tick (0.03) and 10yr up 3.6bps at 4.316
MBS up 1 tick (.03) and 10yr up 2.8bps at 4.308
Consolidation Continues Ahead of CPI
| Time | Event | Period | Actual | Forecast | Prior |
|---|---|---|---|---|---|
| Wednesday, Mar 12 | |||||
| 12:00AM | Roll Date - UMBS 30YR | ||||
| 7:00AM | Mar/07 MBA 30-yr mortgage rate (%) | Mar/07 | 6.67% | 6.73% | |
| 7:00AM | Mar/07 MBA Mortgage Applications | Mar/07 | 11.2% | 20.4% | |
| 7:00AM | Mar/07 MBA Purchase Index | Mar/07 | 154.6 | 144.5 | |
| 7:00AM | Mar/07 Mortgage Market Index | Mar/07 | 269.3 | 242.2 | |
| 7:00AM | Mar/07 MBA Refi Index | Mar/07 | 911.3 | 784.2 | |
| 8:30AM | Feb y/y Headline CPI (%) | Feb | 2.8% | 2.9% | 3% |
| 8:30AM | Feb CPI index, nsa | Feb | 319.082 | 319.22 | 317.67 |
| 8:30AM | Feb m/m Headline CPI (%) | Feb | 0.2% | 0.3% | 0.5% |
| 8:30AM | Feb y/y CORE CPI (%) | Feb | 3.1% | 3.2% | 3.3% |
| 8:30AM | Feb m/m CORE CPI (%) | Feb | 0.2% | 0.3% | 0.4% |
| 8:30AM | Feb Core CPI index, sa | Feb | 319.775 | 319.086 | |
| 10:30AM | Mar/07 EIA Crude Oil Imports Change | Mar/07 | 0.503M | -0.054M | |
| 10:30AM | Mar/07 Crude Oil Inventory (ml) | Mar/07 | 1.448M | 2M | 3.614M |
| 10:30AM | Mar/07 EIA Gasoline Production Change | Mar/07 | -0.078M | 0.464M | |
| 10:30AM | Mar/07 EIA Gasoline Stocks Change | Mar/07 | -5.737M | -2M | -1.433M |
| 10:30AM | Mar/07 EIA Cushing Crude Oil Stocks Change | Mar/07 | -1.228M | 1.124M | |
| 10:30AM | Mar/07 EIA Distillate Stocks Change | Mar/07 | -1.559M | -1.3M | -1.318M |
| 10:30AM | Mar/07 EIA Distillate Fuel Production Change | Mar/07 | -0.113M | -0.587M | |
| 10:30AM | Mar/07 EIA Heating Oil Stocks Change | Mar/07 | -0.183M | -0.067M | |
| 10:30AM | Mar/07 EIA Refinery Crude Runs Change | Mar/07 | 0.321M | -0.346M | |
| 11:30AM | 17-Week Bill Auction (%) | 4.175% | 4.180% | ||
| 1:00PM | 10-yr Note Auction (bl) | 39 | |||
| 1:00PM | 10-Year Note Auction | 4.310% | 4.632% | ||
| 2:00PM | Feb Federal budget, $ (bl) | Feb | $-307B | $-303.2B | $-129B |
| Thursday, Mar 13 | |||||
| 8:30AM | Feb PPI YoY | Feb | 3.3% | 3.5% | |
| 8:30AM | Feb Producer Prices (%) | Feb | 0.3% | 0.4% | |
| 8:30AM | Feb PPI Ex Food, Energy and Trade MoM | Feb | 0.3% | ||
| 8:30AM | Feb PPI Ex Food, Energy and Trade YoY | Feb | 3.4% | ||
| 8:30AM | Feb Core Producer Prices YY (%) | Feb | 3.6% | 3.6% | |
| 8:30AM | Mar/08 Jobless claims 4-wk avg (k) | Mar/08 | 224.25K | ||
| 8:30AM | Feb Core Producer Prices MM (%) | Feb | 0.3% | 0.3% | |
| 8:30AM | Feb PPI | Feb | 147.716 | ||
| 8:30AM | Mar/01 Continued Claims (ml) | Mar/01 | 1900K | 1897K | |
| 8:30AM | Mar/08 Jobless Claims (k) | Mar/08 | 225K | 221K | |
| 10:30AM | Mar/07 Nat gas-EIA, change bcf | Mar/07 | -48Bcf | -80Bcf | |
| 11:30AM | 8-Week Bill Auction | 4.220% | |||
| 11:30AM | 4-Week Bill Auction | 4.230% | |||
| 12:00PM | Mar/13 15-Year Mortgage Rate | Mar/13 | 5.79% | ||
| 12:00PM | Mar/13 30-Year Mortgage Rate | Mar/13 | 6.63% | ||
| 1:00PM | 30-Yr Bond Auction (bl) | 22 | |||
| 1:00PM | 30-Year Bond Auction | 4.748% | |||
| 4:30PM | Mar/12 Central Bank Balance Sheet | Mar/12 | $6.76T | ||
