US inflation

I am glad CPI “chose” not to put us on the path to destruction by printing overnight some disturbingly high number that would have put +50bps back on the cards whilst the market was still suffering indigestion from SVB. However, it looms in the background, given persistence.

0.5% for core inflation over the month is still too hot.

It seems that with much of the US mortgage market locked in at 2% for 30 year fixed rate mortgages, monetary policy is having trouble getting traction.

Sure, stuff is breaking at the margin, like SVB (although SVB is not a systemic risk, it is still indicative of the general “handwaving” concerns about what happens when the tide goes out).

But without SVB, there’s little doubt that we’d have had a 50bps hike based on this, and the other recent US CPI numbers.

2 year yields fell enormously, in the US, over the past few days, as have, to lesser degrees, Aussie yields. 10s haven’t fallen by all that much, but it does mean there’s modest scope to tweak portfolios for those long 2’s (usually the “predominantly” (as I mix my terms) floating rate managers).

Cash is now quite a decent alternative, given credit spreads have narrowed over the past few months (and didn’t meaningfully blow out on the back on SVB) and the shorter-dated bonds gained.

Tiny stuff overall, though.

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