Below is a summary of my post-CPI tweets.
10y Breakevens unch to +0.5bp. They’re at 6 month highs of 1.92%, but amazing they can’t get to 2%.
On CPI: Last month there was an upside surprise with a strong 0.2%, making it 2 of the last 3 months with upside surprises.
The comparisons to year ago are about to get more difficult though. Today we drop off a 0.18% from last November.
We drop off a 0.22%, 0.31%, 0.21% next three months after that.
This month we’re again watching New & Used Cars and Trucks, which have not yet shown any response to survey evidence of increases.
Also an eye on Primary Rents, which have been declining although the Shiller Home Price Index is reaching new local highs.
Last mo, median CPI scored its largest m/m incr since July ’08. So in short – we’re in an inflation upswing; just need to see how much.
Consensus for today’s number is 0.2% on core – almost exactly, keeping y/y at 1.8%.
Well, core is 0.1%…but waiting for Bloomberg to drop the actual figures. Looks like a big miss, not a little miss.
yeah, 0.12%, pushing y/y down to 1.71%. Last 4 months have seen two high misses and two low misses.
Core goods rose to -0.9% y/y from -1.0%, but core services down to 2.5% from 2.7%. SO IT ISN’T THE INTERNET, FOLKS.
10y breaks plunging 4bps since pre-data, on the way to creating another buying opportunity.
Only way 1.89% 10y BEI make sense is if inflation is permanently broken. But median CPI is 2.3% y/y. So it’s not broken!
(We have TIPS about 53bps cheap at current nominal yields).
In major subgroups, Apparel decelerated, Recreation decelerated, Other decelerated. Medical unch. Everything else up. Interesting.
In Housing, Primary Rents decelerated slightly again 2.68% from 2.70%, but seem to be converging on our model.
OER 3.12% vs 3.20%…there’s your problem…and Lodging Away from Home plunged to 0.60% from 1.36% y/y. But the latter is a small weight.
New vehicles -1.08% vs -1.38%; used cars to -2.10% from -2.89%. Not really the bump we are due.
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