Little fear of CPI
September 11, 2025
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—ECB today.
–PPI lower than expected, yet yields little changed in front end. SOFR contracts in first three years from Z5 to Z8 up 1 to 1.5 bps. 2y yield -1.1 at 3.531. Solid 10y auction, 4.046 immediately before, and actual result was 1.3 bps through at 4.033. 2/10 at new recent low around 50 bps. Related example is new lows from reds to more deferred SOFR contracts. For example, reds (2nd yr) to blues (4th yr) settled at a spread of just 27.25 bps, with reds 9708.75 and blues 9681.5. When the Fed eases or is expected to ease aggressively, these forward calendars generally steepen. Current spreads suggest a Fed that will slowly ease against a backdrop of tepid growth at best.
–Sept SOFR options expire Friday. 0QU 9700^ settled 8.0 ref SFRU5 9701.5.
–CPI today expected 0.3 from 0.2. YOY 2.9 from 2.7%. Ex-Food and Energy expected 3.1 from 3.1. The market has clearly dismissed inflation concerns.
–30y auction. Current bond yield is 4.677%, which was down 4 yesterday.
–Hoping that Charlie Kirk’s assassination doesn’t lead to an acceleration of the US political divide in a more violent way. Falling near today’s anniversary of 9/11, it signals a change of focus on internal vs external risk.
