Surprise CPI Sends 10-Year Treasury Yield Near YTD High

Another CPI beat leads rates higher, 75 bp hike priced in. CPI increased 0.1% in August MoM, higher than the -0.1% consensus expectation. Elevated shelter, food and medical care prices were largely offset by a 10.6% decline in gasoline. In response to higher inflation, UST yields climbed across the curve in anticipation of a 75bp hike in September and potentially elevated hikes in November and December. 2-year yields ended the day at ~3.76%, up 18.5 bps, and the 10-year was up 5 bps, ending at ~3.41%.

Equities suffer from surprising inflation data. The stock market sold off today, the S&P 500, Dow Jones, and NASDAQ realizing losses of over 3.90%, with tech-heavy NASDAQ seeing losses of 5.16%. As it was with rates, the primary driver of today’s sell-off was today’s CPI report. All three major indices sit anywhere from 15-26% down YTD.  

Day ahead. The Fed blackout continues, leaving market data as the primary events. Reports on producer price inflation and gasoline stocks will be released at 8:30 AM ET and 10:30 AM ET, respectively.