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

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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

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