If only the bond market cared as much about producer prices as it does for consumer prices!  The latter had a fine showing yesterday with CPI coming in right on target with a big drop in housing costs.  But today's drop in producer prices is on another level.  Headline PPI dropped 0.5% vs an unchanged forecast.  More importantly, core PPI was down 0.1% vs a +0.3% forecast. This is the first time it's been in negative territory since the start of the pandemic.

The caveat is that the market knows about deflation in wholesale goods while it continues to wait for better progress in "core services."  The chart of core PPI in year-over-year terms makes this much more apparent.

As such, today's PPI can only do so much, but at least it's getting things kicked off on a positive note.  Bonds have undoubtedly been willing to respond.  The response just isn't as big as most of the other data flash points of the past 2 weeks.

From here, bonds will wait to digest the afternoon's 30yr bond auction and tomorrow morning's Retail Sales data (which at least one Fed speaker mentioned as one of several data points being watched ahead of the next meeting.