Good morning. I’ve already taken to these airwaves and posted couple earlier updates — stock jockey weekly warmup and a couple updated Fed calls over the weekend from JPM and Goldilocks … This all occurred ‘while we slept’ and for more on just that, this just hit inbox
… Treasuries are modestly lower and the curve little changed as market attention now turns to Wednesday's CPI print and this week's 'mini' refunding sales of 3's, 10's and 30's. DXY is higher (+0.2%) while front WTI futures are little changed (-0.25%). Asian stocks were mixed with Japan closed for holiday, EU and UK share markets are all a hair lower while ES futures are showing -0.15% here at 6:45am. Our overnight US rates flows saw futures volumes pick-up as UST 10yr yields briefly breached 1.80% for the first time since January 2020. Asian credit-linked names were sellers too before UST and EGB yields came off the boil over the past few hours. Overnight Treasury volume was ~115% of average with 2's (149%) seeing the highest relative average turnover overnight among cash benchmarks.
Moving right along AND from the most popular German banks on global Wall St comes this latest (FI) CoTD
Peak inflation in sight
Annual growth in inflation is expected to peak in January based on fixings implied US CPI levels for the first half of 2022, indicating an inflation market view well aligned to the hawkish messaging from the Fed. The less virulent nature of Omicron compared to the previous strains somewhat alleviates concerns over further deterioration in supply chain. A speedier recovery of global supply chain should be disinflationary on the margin.
In addition, the upcoming December CPI release is the last print to benefit from a "base effect" as December 2020 marks the final months with stagnant inflation rate before CPI embarked on the current trajectory of rapid growth. Retail flows, emblematic of the heightened interest in inflation from nontraditional players, also attenuated shortly before year end and has since resumed to a lesser extent.
Taken together, the considerations above point to limited scope for further widening of US breakevens in the short run.
Fixings imply US inflation would reach peak annual rate in January
