Yields end nearly unchanged despite hot CPI print. Treasury yields soared as much as 17 bps in the immediate aftermath of hotter-than-expected CPI data, before gradually reversing over the remainder of the session. The 2-year yield closed 1bp higher at 4.80%, while the 10-year yield closed 2 bps lower at 5.19%. Meanwhile, equities tumbled as chipmakers continued to sell off, with the S&P 500 and NASDAQ closing 1.11% and 1.88% lower, respectively.
CPI data comes in hot. Headline CPI rose 3.7% YoY in September, slightly above expectations of 3.6% and up from 3.4% in August. Prices rose 0.6% MoM, in line with forecasts. Core CPI, which excludes food and energy, also ran slightly hot at 2.6% YoY and 0.3% MoM, versus the 2.5% and 0.2% expected, respectively. Joseph Brusuelas, the chief economist at RSM, commented, “All of those making the case that inflation would cool or see mild disinflation – it is not in the data.” Yesterday, futures markets saw an October hike as ~24% likely, which rose to ~33% at the end of today’s session.
Goolsbee worries about broad-based inflationary pressures. Chicago Fed President Goolsbee today said he found this morning’s CPI reading “discouraging.” Goolsbee pointed specifically to services inflation, saying “This month’s reading is over 5%…and you can’t really attribute services inflation to tariffs or oil prices or things like that.” Goolsbee also expressed concern about AI investment overheating the economy, saying “if you get overheating buildup on the demand side, that tends to be very persistent and hard to get rid of.” He said it was too early to know if current policy rates are restrictive enough to bring inflation down.