Inflation Data Surprises to the Upside (Again)  

Curve flattens dramatically on hot CPI print. Annualized core CPI came in at 6.6% for September, a 40-year high and above forecasts of 6.5%. The surprise acceleration in inflation effectively locked in a 75 bp rate hike for November and sent the 2-year SOFR swap rate higher ~20 bps to another multidecade high. Fed Funds futures are now pricing in two consecutive 75 bp hikes by the Fed. Despite the action at the short-end of the curve, longer-term rates ended the day only modestly higher, and the spread between the 2-year and 10-year swap rates flattened by an additional 13 bps to -52 bps.

Jobless claims exceed expectations. Initial jobless claims were 228,000 for the week ending October 8th, up by 9,000 from the week before, and higher than the 225,000 predicted by economists. The US job market has remained strong despite rising rates, however as conditions tighten the number of Americans filing for unemployment insurance should be expected to increase.

Day ahead. Monthly retail sales data for the month of September is set for release at 8:30 AM ET. The University of Michigan consumer sentiment for October will follow at 10:00 AM ET.