Good Thursday AM,

Bonds appear to have caught a nice break. As expected, the CPI number came in hotter than expected (5.0% year over year). However, clearly the market expected a hotter number. This increase is below last month’s numbers and this reinforces the Fed’s notion of inflation being transitory. Maybe CPI is nearing or already moved beyond its peak. This should continue to sink into the market and if we get a similar reading next month, give bonds an opportunity to improve further. The 10-yr has been resilient today after popping up to 1.53% (which as of two weeks ago would have been a gift), it has improved to 1.48%. Euro bonds, which yield zero, are also a help. Mortgage bonds were -25bps and are now flat. Let’s see where we close, but if we can hold these levels and stay above the 50-day moving average, which is a technical line in the sand, it is a good sign for rates to improve.

Please remain safe and healthy, make today great.