Markets Await FOMC Tomorrow

Yield Curves continue to fall

We thank you for reading our work today and we hope you are gaining a better understanding of the financial markets, as we navigate these choppy waters together. As we noted earlier today the CPI came in 1/10 below expectations hitting 4.0% YoY dropping from 4.9%. The initial move in everything was higher and the US yield curves were bid, however that all reversed around 10am EST as sellers came in to hit down the front of the curve. Here is how the US yield curves settled on the day as 2s and 5s swung from -8bp on the day to +10bp:

It is important to watch this data as a lot of money is placed into these securities and when we have double digit moves that are a continuation of a trend, well then this is not the type of tide you want to move against. Now we know the US bond market has been pressing for lower rates due to a rate skip or pause, but it seems many have tossed in the towel on that call and are taking Powell & Co. a bit more serious. You can see in this next chart the massive flattening that has gone on over the last 6 weeks: