Hot U.S. CPI !! Bond Bears Growl | JPY weakens past 152.00 | German-US 10Y Spread widens to -210 bps

Yesterday's CPI release had the bond bears growl. The headline and core reading were above consensus exp. of 0.30% and are mentioned in the table below. The core gds inflation provided a bit of relief but the core services component rose 0.52% mom, the much spoken about decline in shelter inflation still eludes us. Atlanta Fed's sticky Price CPI which excludes Food, Energy and Housing rose 5% yoy. 

Last week's curve steepening flattened out this week with US2s10s back to -43 bps from highs of -33 bps at the start of the week. 

Fed Fund pricing materially pared back rate cut bets into 2024 from 66 bps before the CPI release to 42 bps after with 22 bps now priced until the Sep policy. 

JPY bears finally had a catalyst in rising bond treasury yields and broke above the 152.00 handle after consolidating for over 14 trading days. Markets are talking about 155 and 160 levels on USDJPY.

The yield spread on German - US 10Y bonds worsened to -210 bps , a level last seen in Oct 2023 and if one were to look at the weekly chart on the same , there is a textbook double top and if we have a decisive weekly close below -210 bps level, there is more weakness slated for EURUSD. The spread movement is good a proxy for the direction of EUR. Refer to the second chart below.

That's a quick wrap up for yesterday.