Front-End Climbs Ahead of CPI

2s10s spread hits new 20-year low ahead of key inflation data. The front-end of the curve ended the day 7-8 bps higher on relatively low volume ahead of tomorrow’s inflation data. The long-end of the curve was little changed on the day, the 10-year Treasury yield ticking modestly higher to 2.78%. The spread between 2-year and 10-year Treasury yields narrowed to a new 20-year low, breaking through – 0.50% today.

Fed’s Bullard says “soft landing” is feasible. The St. Louis Fed’s Jim Bullard said that he does think that the Fed has retained credibility, and that the central bank still can pull off a soft landing if it gets inflation under control quickly. That said, Bullard’s comments tilted towards the hawkish side, saying that the Fed should be prepared to keep interest rates “higher for longer” and that he was hoping the Fed could hike rates to 4% in 2022. 

CPI print due tomorrow. All eyes will be on the latest CPI figures tomorrow, with significant volatility on the docket if inflation surprises significantly to the upside. Headline annualized inflation is expected to come in at 8.7%, while core inflation is expected to accelerate to 6.1%.