Good Thursday AM from your Hometown Lender,
More inflation data today and it was also much stronger than expected. Not only did the January report come in hotter than expected, the revisions to the December report were large. This should have tanked bonds even more than the CPI report did yesterday.
However, Mr Powell in his wisdom in front of Congress, and knowing that the Fed Funds Rate is still very restrictive, and even possibly with a nod to the Presential pressure, said that the Fed is not concerned about one or two outlier reports and he thinks yesterday’s CPI report was an outlier. He also said the Fed is more focused on the PCE report, which we will get the last week of the month.
All in all, despite some super strong data, bonds have clawed back most of what was lost yesterday.
The 10-year note is back to 4.55%. Although it is in the same trading channel as it was yesterday, we are at the lower end and with some momentum could see rates improve further.
Tomorrow brings some important data as well with Retail Sales, Import Prices, Capacity Utilization, and Industrial Production so we could see some volatility. Oh, tomorrow also brings Valentine’s Day…
