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Bonds rally as CPI prints below expectations
Core CPI held at 0.0%, while headline CPI fell 0.4%, helping push 10-year yields down more than 5 basis points and lifting MBS by more than 3/8 of a point.
U.S. Treasuries and mortgage-backed securities rallied after the latest Consumer Price Index came in far below market expectations, reinforcing expectations for the Fed’s path. Mortgage News Daily said the core CPI reading was 0.0 versus 0.2 forecast, with unrounded core CPI at minus 0.17%. Headline CPI was also weaker than expected at -0.4 versus -0.1, while “supercore,” which excludes housing, fell -0.2, marking the first negative reading in more than a year.
The report noted core goods stayed in negative territory for a second consecutive month. It added that the bond move began immediately, led by the short end of the yield curve, which is more closely tied to rate expectations.
Mortgage News Daily also pointed to market impact across rates and mortgage credit, saying even 10-year yields were down over 5 basis points and that MBS were up more than 3/8 of a point.