Daily Market Color July 12, 2023Rates Fall Dramatically as Headline and Core CPI Decelerate Rates plummet on CPI miss. Weak CPI figures fueled a significant decline in swap rates and Treasury yields, the policy-sensitive 2-year UST yield dropping 13bps to 4.75%. The long end of the curve also came down dramatically, the 10-year Treasury yield falling 11bps to 3.86%. Rates have now come down 30-40bps across the curve since last Wednesday’s surprise ADP report. All that said, market-implied rate hike probabilities for the Fed’s July meeting have remained unchanged, as the 25bp hike still appears to be guaranteed. CPI misses across the board. June CPI proved weaker than expected today, with both headline and core YoY figures at their lowest levels seen since 2021. Both headline and core MoM levels came in at 0.2%, which is equivalent to an annualized rate of ~2.43% if extrapolated out over the next twelve months. Price declines in energy, food, shelter, and transportation services were major drivers of the deceleration. Day ahead. PPI will headline the session’s activity at 8:30 AM. Jobless claims data will also be released in the morning ahead of public commentary from Fed voter Christopher Waller later in the day.