MBS Day Ahead: Bonds Navigate Dual Landmines in CPI and Fed Dots


Posted To: MBS Commentary

Today brings 2 key developments in the form of the 8:30am CPI data and the afternoon's Fed announcement. CPI–the Consumer Price Index–was one of the top inflation metrics in terms of market movement. Like other inflation metrics, it faded into obscurity for post of the decade following the financial crisis. Markets simply didn't care about inflation data because the general notion of inflation was so far off the radar. The Nov 2016 presidential election seemed to mark a sharp turning point for inflation hawks. With Trump seen as highly likely to increase deficit spending and perhaps even aggregate demand (via promises of stimulus and tax cuts), there was a legitimate reason to fear an uptick in inflation. But even before that, the Fed had begun to warn that inflation was inexplicably…(read more)

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