Bonds Will Rally After CPI (Or They'll Sell Off)

Let's not build up the upcoming CPI data too much.  It's important and it is highly likely to result in a level of bond market movement commensurate with its distance from forecasts.  But that distance can be seen both above and below the forecast levels.  Each option carries a different implication for the rate reaction and there's no way to know which option we'll get ahead of time.  What we CAN know with relative certainty is that the bigger the "beat" the larger the jump in rates should be.  The bigger the "miss," the bigger the drop in rates.  

Market Movement Recap
09:19 AM

Modestly stronger overnight with yields as low as 3.95.  Slight bounce early but still down 1.4bps at 3.986.  MBS up 1 tick (0.03).

02:35 PM

Modest gains in the PM hours, but giving them up now.  Bonds at exactly the same levels as the last update.

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