Bond Market Update

Data Recon

• U.S. Treasuries have slid to lows in immediate reaction to the September CPI report, which showed an acceleration in year-over-year rates for CPI (to 3.7% from 3.4%) and Core CPI (to 2.6% from 2.4%). The front end has paced the post-CPI weakness while longer tenors outperform, but they have not been able to stay out of the red.
• Total CPI increased 0.6% month-over-month (Briefing.com consensus: 0.6%), led by a 5.2% jump in the energy index, following a 0.4% increase in August. The September increase left total CPI up 3.7% year-over-year versus 3.4% in August. Core CPI, which excludes food and energy, increased 0.3% month-over-month (Briefing.com consensus: 0.2%), pushed by a 0.4% increase in the shelter index, following a 0.3% increase in August. That left core CPI up 2.6% year-over-year versus 2.4% in August.
  • The key takeaway from the report is the acceleration in inflation away from the Fed's 2.0% inflation target. That is going to accelerate concerns about a possible tightening of Fed policy at the October FOMC meeting, not to mention deficit worries as cost-of-living adjustments for 2027 for SSI recipients are on track to see their largest increase in three years.
• Yield Check:
  • 2-yr: +12 bps to 4.91%
  • 3-yr: +11 bps to 5.03%
  • 5-yr: +10 bps to 5.11%
  • 10-yr: +8 bps to 5.30%
  • 30-yr: +5 bps to 5.61%