A modest beat in December's US Consumer Price Index (CPI) data has sparked a rally across both equities and bonds, easing concerns over future interest rate hikes. The CPI's lower-than-expected rise, with the Supercore dipping by 0.21% and the core month-over-month figure falling by 0.8%, has led swap traders to fully price in a rate cut by July, reversing previous expectations of a delay until September or October. This shift in rate expectations has fueled a repositioning relief rally rather than outright euphoria, as investors adjust to the new economic outlook.
The decline in 10-year Treasury yields, down by almost 15 basis points, reflects increased bond prices and reduced fears of a 5% rate looming on the horizon. This bond market movement, coupled with a weaker dollar, has also supported gains in assets typically priced in USD, such as precious metals. Additionally, crude oil and natural gas prices have risen, bolstered by positive EIA supply data and geopolitical tensions, including Russia sanctions.
The 10-year Treasury yield (TNX) currently stands at 4.65 as of 16:11 on January 15, down from its last close of 4.79. This decline underscores the market's reaction to the inflation data and the subsequent shift in interest rate expectations.