Anticipation of rising inflationary pressures is casting a shadow over the bond market, with the December Producer Price Index (PPI) report expected to show an acceleration in core PPI growth to 3.8% y/y from 3.4% in November. This potential uptick in inflation is bearish for bonds, as it suggests a possible increase in interest rates. Investors are likely to use the PPI as a proxy for the upcoming Consumer Price Index (CPI) release, which could lead to significant market movements. Reports from various Federal Reserve districts and S&P Global indicate rising input costs across manufacturing and services sectors, reinforcing expectations of broader inflationary trends.
The iShares 20+ Year Treasury Bond ETF (TLT), which focuses on long-term U.S. Treasury bonds, is currently trading at $85.26 as of 08:22 on January 14, slightly below its last close of $85.43. The ETF's price movement reflects the market's cautious stance amid expectations of higher inflation and potential interest rate hikes.