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PPI revisions pull producer inflation lower, boosting Treasuries
The report showed annual PPI revised to 5.5%, down from an initial 6.0 reading, while Treasuries and MBS moved from modestly weaker to moderately stronger.
Mortgage News Daily reports that today’s Producer Price Index delivered a market reaction as it echoed the prior session’s sharply lower Consumer Price Index, with bonds responding positively after the release.
The outlet said the revisions to earlier months lowered annual PPI by a full 1.0 percentage point versus last month’s initial reading, with annual PPI at 5.5% compared with 6.0 previously, after it was revised from 6.5 when initially reported. It also highlighted that fuel prices loom large in the data, with core monthly PPI at 0.2 versus 0.3, and with May’s headline PPI revised from 1.1 to 0.6.
According to Mortgage News Daily, Fed funds futures improved, and the direction of price action shifted for Treasuries and mortgage-backed securities, moving from modestly weaker to moderately stronger after the report.
The outlet added that shorter term yields were expected to benefit more, while warning that a potential oil price breakout could reverse gains in bonds.