Producer Price Inflation Overshadowed by Fed Minutes  

Rates fall, overcoming higher-than-expected PPI. Swap rates and Treasury yields fell across a flattening curve today, the 2-year yield falling ~1 bps to 4.30% and the 10-year yield falling ~5 bps to 3.90%. The market rallied despite September’s hot PPI figure of 0.4%, which was the first PPI increase in 3 months and greater than the forecast of 0.2%. Meanwhile, today’s release of Fed minutes showed a broad commitment among FOMC members to policy tightening, though several noted the importance of “calibrating” the pace of future hikes, and that the committee should remain cognizant of significant lags in economic data.  

CPI release looms. September’s Consumer Price Index is forecasted to increase by 0.2% MoM compared to the 0.1% increase observed in August. Core CPI is also expected to increase MoM by 0.4%, a slight downtick from last month’s hot 0.6% level. Consumer price inflation remains one of the most important economic data releases as markets continue to try to measure the effectiveness of the Federal Reserve’s rapid policy tightening.

Day ahead. The latest CPI data release will be published at 8:30 AM ET, which will highlight the day. Initial jobless claims for the week that ended October 8th will also be released at 8:30 AM ET.