The Producer Price Index (PPI) is much more volatile and, on average, much less of a market mover than the Consumer Price Index (CPI), but occasionally, it swings for the fences. Today's release is a clear example with the monthly headline coming in at 1.5 vs 0.5 forecast. In annual terms, headline inflation is a whopping 6.0% versus a 4.9% forecast--up sharply from last month's 4.3% (itself upwardly revised from 4.0%). This is easily the most onerous spike since the pandemic. Even though PPI hit the market harder than CPI, that's not saying much. Bonds are only 2bps weaker at 10am ET--a testament to how little this data tends to matter.
MBS Fully Recover After Initial Reaction to Inflation Data
MBS Fully Recover After Initial Reaction to Inflation Data
There’s no question that this morning’s PPI data hit the bond market. The volume spike was easily higher than that seen with yesterday’s CPI and the ma…