PPI surges, but what's next for US bonds?😳

Unlike the ambiguity out of the CPI, Friday's PPI number came in clearly hotter than expected, where both headline and core numbers rose 0.3% MoM, the strongest prints since the year started. The headline YoY rate rose to 0.8% YoY vs 0.2% YoY last month, and the PCE-related components all came in higher than expected, such as airfares.

On the other hand, consumer sentiment came in relatively lukewarm, with weaknesses seen in the expectations component and an easing in the forward inflation expectations. However, treasuries were unable to sustain a bid despite the somewhat friendly data and yet another early sell-off in equity markets, with yields rising by 5-7bp across the curve throughout the entire session. Similar to the warnings we pointed out in equities, chart patterns on fixed income look relatively ominous as well, with 10y yields broken out from its YTD channel to the upside, with the local highs of 4.25% just a stone's throw away as the next obvious target.

#PPI #PCE #inflation #equity #bond