Rates Complete Round Trip Ahead of CPI

Treasury yields and swap rates extend rebound ahead of CPI. Swap rates and Treasury yields climbed higher once again, led higher by the long end that rose nearly 10 basis points and saw the 10-year Treasury yield end the day at 1.94%. The round trip in rates has been nothing short of remarkable, the 10-year having declined by over 30 basis points last week only to come screaming back toward 2%. The aggressive time table for Fed hikes is also back, Fed Funds futures pricing in over 6 rate hikes by year end.

Attention turns to inflation data. While Russia’s invasion of Ukraine still has the market on its toes, attention has slowly shifted back to the inflation picture where a potential oil supply shock now threatens to further exacerbate already elevated inflation. Tomorrow’s CPI figure is the last major economic data release before the FOMC’s meeting, and could dictate whether or not the bank chooses to hike rates by 0.50%. Current forecasts call for an increase of headline CPI to 7.9%.