Inflation Data Signals Slowdown

Bonds sell off after today’s inflation data.  Rates were up across most of the curve following today’s slew of data releases highlighted by monthly and yearly PCE data.  The movements today led to some curve flattening, with short-end rates roughly flat or slightly lower, while mid-term rates rose ~5bps across tenors.  The 2-year yield was up ~5bps to 4.32% and the 10-year rose ~7bps to 3.75%.  Equities were roughly unchanged on the news.

PCE results broadly indicate continued cooling inflation.  Headline MoM PCE was 0.1% for November, in line with estimates and lower than 0.3% in October.  Core MoM PCE was 0.2%, in line with estimates and lower than last month’s 0.3%.  These monthly results viewed in tandem with the core PCE decline in October MoM help build a story of consistently declining inflation.  Yearly results were also lower than last month’s figures, with headline PCE down 60bps to 5.5% YoY, and core PCE down 30bps to 4.7%.  Even though YoY core PCE was slightly above the estimated 4.6%, the data on balance showed that inflation slowed this month.  

Week Ahead.  Next week’s calendar is light but keep an eye out for Wholesale Inventories on Tuesday. To all our readers, Derivative Path wishes you and yours a happy and restful holiday season.  Swap markets will be closed entirely on Monday in observance of the Christmas holiday, and there will be an early close (2pm EST) on Friday for the New Years holiday.