CPI Comes in Low; Logical Rally in Bonds

After plenty of anticipation over the past few days, the Consumer Price Index (CPI) arrived this morning with fairly good news for the bond market.  Core monthly CPI (arguably the most important number) came in at 0.2 vs 0.3 f'cast and 0.4 last time.  This is a good result for bonds, though not quite stellar.  As expected, the "miss" in the data is resulting in a logical rally for bonds with yields testing the next line in the sand at 3.89%--just a skip and a jump from the 3.84 techncial level.

Stocks and bonds continue settling back into the familiar "rising tide trade" whereby expectations for relatively looser Fed policy helps both sides of the market (i.e. a rising tide that lifts all boats).

Notably though, there's been essentially no change to the outlook for July's rate hike.  Instead, the market is trading today's data as an input on the likelihood of additional hikes after that.