Rates Spark: U.S. PPI And Dutch Pension Reforms To Push Curves Steeper Still

2025-08-15 03:25:00 ET

By Padhraic Garvey, CFA , Michiel Tukker , Benjamin Schroeder

US producer prices telegraph a 4% inflation economy, as core hits 3.7% YoY

There is only one thing that bonds can do on a surprise 3.7% year-on-year producer price inflation reading, and that is ratchet back up in yield. The initial reaction was not huge, just low-single digit rises across the curve. It seems the market was thinking, it's "just PPI". A CPI reading like this would garner a much bigger market reaction - especially the July 0.9% month-on-month reading on headline PPI. That said, price action in the hours following the release turned much heavier, and in the end, the aggregate reaction was quite considerable, with the 10yr yield up by almost 10bp, and the 2yr yield also well up but not quite as much, leaving the 2/10yr curve steeper. The fact that jobless claims held in at the 225k area also helped push yields up....

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