There is a chance we could see a 0.2% MoM outcome on the PCE deflator. The consensus is for 0.3%, but it’s a close call. The details show the average running at 0.26%. Statistically, that’s practically just as likely to round down to 0.2% MoM. If it does, it could be pivotal. For the bond market to rid itself of the bear dominance, it needs to see the start of monthly 0.2% outcomes. That can help avert further imminent moves to the upside for longer-dated bond yields.
But if we get what’s expected – 0.3% MoM – we remain on a path towards 5% on the 10yr Treasury yield.
If realised, a (surprise) 0.2% MoM outcome could begin a run of them, which could be significantly bullish for bonds. However, a sneak preview of the core CPI reading for May, which is due in a few weeks, has a 0.3% MoM expectation. This wouldn’t be good. It would mark a run of five months with 0.3% or higher MoM outcomes. It keeps the pressure on market…
