U.S. CPI Data and Its Bond Market Impact

The upcoming U.S. CPI data release is set to influence the Federal Reserve’s monetary policy and the bond market. With inflation remaining a concern and potential fiscal expansion under Trump’s re-election, uncertainty is driving market volatility.

1. Fed’s Rate Cut Path Faces Resistance

The Fed is signaling caution, with a 25 bps rate cut in December only slightly probable. Higher CPI data could push bond yields higher, reducing the chances of further cuts.

2. Rising Treasury Yields

U.S. Treasury yields, especially the 10-year note, are climbing, reflecting concerns over fiscal deficits. Post-election, yields surged as markets anticipate larger government spending and persistent inflation risks.

3. Political and Fiscal Challenges

Fiscal expansion under Trump could strain the Fed’s cautious stance. Rising deficits and inflation risks may force the Fed to maintain high rates longer, adding pressure on financial conditions.

Conclusion

CPI data will b…