10-year Treasury yields down over 3 bps to 1.55%
The big leap to the upside came after the hot US CPI data but we are seeing the market not get too carried away - at least for now - as yields retreat slightly today.
10-year yields are down over 3 bps to 1.55% while 2-year yields are down by 1.5 bps to 0.505% as we look towards European morning trade.
Fedspeak will be the main thing to watch this week, as the market will poke and prod for clues on sentiment after the inflation figures last week.
That said, don't expect all too much from Fed officials in the days ahead. I shared some thoughts last Wednesday before the US CPI data release:
Expect Team Transitory to be all over any slight dips in inflation pressures but in the case of any surprise beats, they will maintain that "this is very much expected" with the narrative being that the trend should keep up going into early next year at least.As such, don't expect there to be any real takeaways from today's report.A higher reading mainly reaffirms the ongoing trend that price pressures are surging but there isn't much evidence to deny Team Transitory's argument that all of this will abate and ease as we look towards the middle of next year.In short, the inflationistas have more to lose in the next few months if price pressures don't exactly keep with the trend that we have been seeing throughout the year so far.But in any case, we can only wait on the data to provide us more clarity with the macro situation globally and that won't be sorted out until 1H 2022 at the very least.While the data today may see market participants get a little jumpy, remember this is going to be a marathon and not a sprint when it comes to the inflation debate.
For now, market participants are also settling down a bit with the dollar a touch on the softer side as well. Although, the greenback continues to reside in a good technical spot across the board and that hasn't changed despite a light breather for the time being.
