Today begins with the much-anticipated PCE inflation data coming in right in line with expectations. The result: a bond market that was already mostly unchanged in the overnight session remains mostly unchanged in early trading. With yields hovering around the best levels in more than a month, it's hard to object to the flat performance. In fact, even a modest give-back could be tolerated and understood from the standpoint of traders squaring up positions heading into the 3.5-day weekend. Bonds close at 2pm ET today and are fully closed on Monday.
By coming in in-line with expectations, core PCE prices have now declined for the 2nd consecutive month. Headline prices (orange line) also fell for the first time since the biggest inflation spike began in 2021.
The correlation between the big peak in inflation (for now, and hopefully for a long, long time) and the potential peak in bond yields is not lost on us.
Also interesting is the fact that bonds are increasingly willing to hold recent gains despite a bounce in stocks. The two had previously been almost inseparable.