Our CPI Nowcast just broke the 2% threshold. If you are unfamiliar with why this threshold matters, read the note below:
Treasuries: Inflation Shock Or Demand Destruction?
Military confrontation continues in Iran, sustaining the global inflationary impulse through energy prices. This inflationary impulse has material effects for all asset prices. This inflation shock has caused much debate amongst the macro community about its implications for US Treasuries. We leverage our systematic process to offer some insight into ho…
We show the latest readings from our CPI Nowcast below:
Now, while these conditions improve the near-term outlook for fixed income, we think it is essential to recognize that this disinflationary regime is likely to be transient without continued downside in oil prices, as core inflationary pressures remain in place. Thus, these shifting dynamics bring us from a negative stance on fixed income to a neutral one, rather than a positive one. For us to become materially positive on fixed income, we will require significant further weakness in the oil complex, along with signs of deteriorating economic activity. Nonetheless, the dynamics will likely provide near-term relief and support to fixed income.
Until next time.