Higher than expected PPI has markets worried for tomorrow's CPI

___

Published Date 10/12/2022

Sept PPI at 8:30 am ET was generally in line with forecasts, the 10 note initial reaction wasn’t much, +0.1% to 3.96%. MBS prices down 6 bps from yesterday. The producer price index for final demand climbed 0.4% from August, the first increase in three months, and was up 8.5% from a year ago. Excluding the volatile food and energy components, the so-called core PPI increased 0.3% in September and advanced 7.2% from a year earlier. The median estimates in a Bloomberg survey of economists called for a 0.2% monthly increase in the PPI and a 0.3% rise in the core. Nothing in the report leads to any deviation from the expected 0.75% increase in the FF rate in November. Tomorrow’s CPI data is more critical. Yesterday the 10 yr. note yield increased 5 bps and MBS prices were hit hard at 3 pm on comments from Loretta Mester, Cleveland Fed saying she sees no reason for the fed to moderate the plan to increase rates to 4.50% by year’s end, now at 3.25%.

Weekly MBA mortgage apps were weak again, after declining 20% the prior week, last week -2.0%, purchases -2.1% and re-finances -1.8%.

At 9:30 am the DJIA opened -40, NASDAQ +12, S&P -1. 10 yr. note at 9:30 am +1 bp. FNMA 5.5 30 yr. coupon at 9:30 am +3 bps and 58 bps lower than 9:30 am yesterday.

At 1 pm Treasury will sell $32B of 10s (9yr 10 months).

At 2 pm FOMC minutes from the Sept meeting.

Source: TBWS

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.