Previewing Tuesday’s inflation report from the US, “the overall CPI (forecast: up 0.3%) was probably boosted by gasoline prices, which were falling a year ago; the 12-month change probably rose to 2.4% from 2.1%,” said TD Securities analysts.
“We expect a 0.2% rise in the trend-setting core index. The 12-month change in core probably held at 2.3%, although it is a close call between 2.3% and 2.4%. A 0.22% m/m rise would likely be enough for 2.4%; we have 0.21%.”
“Our forecast for CPI should keep the 10y in the 1.75-1.9% range. A weaker report should have a disproportionate impact on rates. TIPS breakevens have risen in recent months, pricing in the improvement in global and US data and a dovish Fed.”