MBS RECAP: No New Inflation, But Indecision Remains

By Matthew Graham

Posted To: MBS Commentary

Core CPI came in at 2.2% today. Back in 2016, this was cause for concern, but now bond markets trade like inflation isn’t even a remote concern. What’s up with this? If 2% is the Fed’s target and we’re at 2.2% currently, isn’t that bad for bonds? We discussed this in greater detail in the Day Ahead ( refresh your memory , if you like) , which essentially argued that inflation doesn’t really matter anymore. That’s a notion I’d been shouting from the rooftops for 6 or 7 years until inflation abruptly seemed to matter again in 2016. Since today was a slow-ish market day, I thought I’d give you the inflation backstory instead of forcing meaningless analysis on a sideways market that’s waiting for economic data, an end to the shutdown, or an indication of…(read more)

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