Risk-Off for Markets Ahead of Inflation Data

Global bond yields pull back in broad risk-off move ahead of CPI. A three-day winning streak in equities came to an abrupt halt, the S&P 500 and Nasdaq Composite declining 0.72% and 1.72% in a broad risk-off session that global equities decline across the board. The move lower in equities and other risk assets pulled yields lower as well, global 10-year rates declining anywhere from 2-5 basis points on the day. The U.S. 10-year Treasury yield reversed some of its declines after the Treasury’s 30-year auction was met with soft demand, but still closed 2 bps lower on the day at 1.50%. All eyes will now turn to tomorrow’s CPI figure which could either support or refute recent calls for an acceleration to the Fed’s asset taper.

U.S. initial jobless claims hit 52 year low last week U.S. unemployment claims fell to the lowest amount since September 1969 to 184,000 last week. Excluding seasonal volatility due to hiring for seasonal holiday jobs, initial claims increased from the prior week to 281,000. However, the trend of claims continues to be downward as a sign that the labor market continues to improve.

The U.S. Labor Department will release November’s consumer price index (CPI) data tomorrow at 8:30a EST. Analysts expect November’s headline CPI to increase to 6.8% and core inflation, excluding food and energy costs, to 4.9%. The report comes before the Fed’s policy meeting next week as Fed members have become increasingly hawkish in recent weeks. Tomorrow’s CPI report could influence Fed members to accelerate the pace of its tapering program.