Bonds Reverse Selloff

The 10-year Treasury note yield rallied by 5 basis points

Highlights

• Markets were ambushed by yesterday’s CPI print, and it’s certainly a challenge to our Fed call…

• … but we see enough in the leading indicators on core prices to hold onto our disinflation view

• Businesses are losing pricing power and have run down cash buffers

• Chinese data show authorities acting forcefully (but so far unsuccessfully) to fight deflation