CPI Coming in Hot. Bonds Feeling The Burn

It is a very straightforward morning for the bond market, but not in any sort of pleasant way.  There was a lot at stake heading into today's inflation data and the results carried clear implications for bonds.  Sadly, the implications are not great.  Core monthly inflation came in at 0.4% versus a 0.3% forecast.  Year over year numbers stayed at 3.9% rather than falling to the 3.7% forecast (extra decimals in the underlying numbers explain why we can see a 0.2% miss in annual but only a 0.1% miss in monthly).  Bonds shot higher immediately and somewhat significantly--easily breaking the 4.19% ceiling in 10yr Treasury yields.   This only increases the burden of proof on downbeat economic data to hearken a turning point in inflation. With a strong jobs report in the rearview, we're basically starting at square one.