Rates Spark: Don't Expect The Relief To Last Long

2025-01-16 03:30:00 ET

Summary

• The US CPI number was better than expected, but it was not a good report.
• It is, however, providing Treasuries with an excuse to do some downside testing for yields. We doubt it goes too far, as there is not the ammunition for it. But the bond bulls are overdue a period of positivity.
• The downside surprise in the US CPIs also saw European rates drop noticeably. EUR rates dropped by up to 10bp led by the belly, while the front end is more firmly seeing the ECB landing at 2%.

By Padhraic Garvey, CFA and Benjamin Schroeder

Room for a downward test in yields, even if just to assess how lower yields feel

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