Treasury prices are slightly lower despite September CPI coming in below expectations. There’s definitely more jitters in the broad markets in recent days. U.S. equities plunged more than 3% yesterday, and despite multi-year highs in long-end yields, trading flows in Treasuries have been relatively poor. Higher currency hedging costs are negatively impacting foreign demand at a time when supply is growing (budget deficit funding). The lack of a stronger bid for Treasuries at current yields only adds to the general anxiety in equity markets. Not surprisingly, Asian equity markets were much lower overnight in a follow through to yesterday’s U.S. session (Nikkei -3.9%, Shanghai -5.2%), and European markets are down approximately 1%. S&P 500 futures were down 20-23 points overnight but have rebounded and are currently flat on the day. Adding to the general anxiety in markets overnight was President Trump telling Fox News that “the Fed is going loco,” and that the central bank was more to blame for the weakness in equities than current trade tensions with China.
Both headline and core CPI were up 0.1% m/m in September versus expectations of 0.2% gains for each metric. Core CPI was unchanged at 2.2% on a year-over-year basis, just below expectations of 2.3% growth. This report provides a little relief for the markets. There was some concern ahead of the report that a higher reading may spark a stronger sell-off in long-end rates, potentially sending the 10-year Treasury yield on a course toward 2.35% given the lack of demand in recent days.
Jason Haley
Managing Director, Investment Management Group
| Date | Event | Survey | Actual | Prior |
| 10/09 | NFIB Small Business Optimism | 108.3 | 107.9 | 108.8 |
| 10/10 | MBA Mortgage Applications | — | -1.70% | 0.00% |
| 10/10 | PPI Final Demand MoM | 0.20% | 0.20% | -0.10% |
| 10/10 | PPI Ex Food and Energy MoM | 0.20% | 0.20% | -0.10% |
| 10/10 | PPI Ex Food, Energy, Trade MoM | 0.20% | 0.40% | 0.10% |
| 10/10 | PPI Final Demand YoY | 2.70% | 2.60% | 2.80% |
| 10/10 | PPI Ex Food and Energy YoY | 2.50% | 2.50% | 2.30% |
| 10/10 | PPI Ex Food, Energy, Trade YoY | — | 2.90% | 2.90% |
| 10/10 | Wholesale Inventories MoM | 0.80% | 1.00% | 0.80% |
| 10/10 | Wholesale Trade Sales MoM | 0.50% | 0.80% | 0.00% |
| 10/11 | CPI MoM | 0.20% | 0.10% | 0.20% |
| 10/11 | CPI Ex Food and Energy MoM | 0.20% | 0.10% | 0.10% |
| 10/11 | CPI YoY | 2.40% | 2.30% | 2.70% |
| 10/11 | CPI Ex Food and Energy YoY | 2.30% | 2.20% | 2.20% |
| 10/11 | CPI Index NSA | 252.697 | 252.439 | 252.146 |
| 10/11 | CPI Core Index SA | 258.629 | 258.441 | 258.141 |
| 10/11 | Real Avg Weekly Earnings YoY | — | 1.10% | 0.50% |
| 10/11 | Real Avg Hourly Earning YoY | — | 0.50% | 0.20% |
| 10/11 | Initial Jobless Claims | 207k | 214k | 207k |
| 10/11 | Continuing Claims | 1660k | 1660k | 1650k |
| 10/11 | Bloomberg Consumer Comfort | — | — | 61.6 |
| 10/11 | Bloomberg Oct. United States Economic Survey | |||
| 10/11 | Monthly Budget Statement | $75.0b | — | $7.9b |
| 10/12 | Import Price Index MoM | 0.20% | — | -0.60% |
| 10/12 | Import Price Index ex Petroleum MoM | -0.10% | — | -0.20% |
| 10/12 | Import Price Index YoY | 3.10% | — | 3.70% |
| 10/12 | Export Price Index MoM | 0.20% | — | -0.10% |
| 10/12 | Export Price Index YoY | 2.90% | — | 3.60% |
| 10/12 | U. of Mich. Sentiment | 100.5 | — | 100.1 |
| 10/12 | U. of Mich. Current Conditions | — | — | 115.2 |
| 10/12 | U. of Mich. Expectations | — | — | 90.5 |
| 10/12 | U. of Mich. 1 Yr Inflation | — | — | 2.70% |
| 10/12 | U. of Mich. 5-10 Yr Inflation | — | — | 2.50% |