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%