Bond Market Update

Data Recon

• Total CPI increased 0.2% month-over-month in August, as expected. Core-CPI, which excludes food and energy, increased 0.3% month-over-month (Briefing.com consensus 0.2%), led by a 0.5% increase in the shelter index. On a year-over-year basis, total CPI was up 2.5% -- the smallest 12-month increase since February 2021. Core-CPI increased 3.2% over the last 12 months, unchanged from July.
  • The key takeaway from the report is the understanding that core inflation is sticking stubbornly above the Fed's inflation goal of 2.0% which, to be fair, is oriented around the PCE Price Index. Still, the elevated core reading on a monthly and annual basis will be a focal point for the Fed and a likely reason to keep a September rate cut capped at 25 basis points.
• Yield Check:
  • 2-yr: +6 bps to 3.67%
  • 3-yr: +2 bps to 3.49%
  • 5-yr: +5 bps to 3.48%
  • 10-yr: +3 bps to 3.68%
  • 30-yr: +2 bps to 3.98%