Great Reaction to CPI, But What's Next?

Today's CPI data serves the important role of pushing back on the narrative of troublingly persistent inflation.  The 0.2% month-over-month level, after all, annualizes to 2.4%.  If that level were to be maintained, the Fed would be in a position to declare victory on inflation and rule out additional rate hikes.  The market's takeaway seems to be that CPI takes one of the two additional rate hikes off the table, but that is wasn't enough to alter the course for the upcoming meeting.  From a technical standpoint, bonds rallied enough to undo all of last week's damage.  

Econ Data / Events
    • M/M Core CPI
      • 0.2 vs 0.3 f'cast, 0.1 prev
    • Y/Y Core CPI
      • 4.8 vs 5.0 f'cast, 5.3 prev
Market Movement Recap
09:03 AM

Modestly stronger overnight with additional gains after CPI.  MBS up almost half a point.  10yr down 6bps at 3.915.

01:26 PM

Rally Continues... MBS up 3/4ths of a point.  10yr down 11.7bps at 3.859.

02:52 PM

Leveling off now and dialing back just a hair. MBS up just under 3/4ths.  10yr down 10.7bps at 3.869.