Bond Market Update

Data Recon

• U.S. Treasuries have rallied off their early lows in reaction to the May CPI report, which was cooler than expected. The rally has been paced by the belly, making for a strong reversal from its early underperformance.
• Total CPI was up 0.1% month-over-month in May (Briefing.com consensus 0.2%) after increasing 0.2% in April. Core CPI, which excludes food and energy, was up 0.1% month-over-month (Briefing.com consensus 0.3%) after increasing 0.2% in April. On a year-over-year basis, total CPI was up 2.4%, versus 2.3% in April. Core CPI was up 2.8% year-over-year, versus 2.8% in April.
  • The key takeaway from the report is that both headline and core CPI were lower than expected on a month-over-month basis. While these readings may not give a big boost to near-term rate cut expectations, they should also not cause the market to think that the next cut will be delayed.
• Yield Check:
  • 2-yr: -6 bps to 3.95%
  • 3-yr: -8 bps to 3.91%
  • 5-yr: -7 bps to 4.02%
  • 10-yr: -5 bps to 4.42%
  • 30-yr: -3 bps to 4.91%