Daily Market Color

CPI Rises as Rate Move Subdued

CPI hits 7%, but rates end the day only modestly higher. Swap rates and Treasury yields rallied in the immediate aftermath of the record CPI figure- perhaps pointing to profit taking with market participants positioned for an even higher inflation figure. But, rates would ultimately reverse the move, climbing higher throughout the session before ending the day 1-2 basis points higher across a range of maturities. Ironically, breakeven inflation rates ended the day sharply lower- ultimately declining on the day by 5-8 bps despite the hot CPI print.  

Consumer prices hit a four-decade high. Today’s consumer price index (CPI) release showed December CPI increased 7.0%, a level not seen since Bette Davis Eyes topped the charts. Though economists see CPI moderating to around 3.0% by year end 2022 (still well above the Fed’s 2.0% target), many economists see CPI hovering around the 7.0% mark for the near term.

Need a break from inflation data? You’ll have to wait one more day… December’s producer price index (PPI) will be released tomorrow with analysts calling for 9.8% YoY increase in producer prices. Increases in producer prices typically lead consumer prices, and follow with a lag as producers pass on as much of the increase as they can to their end customers.

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