The 5-year yield dropped 12+ bps in the days leading up to
The month to month core and headline CPI numbers were expected to be up 0.3% while the year to year number was expected to be down from 2.7 to 2.5%, but while the month to month core number was as expected, the headline number was reported to be 0.2% by Bloomberg, although another calendar I watched showed it at 0.3%, but that hardly matters since the year over year number was reported to have dropped to 2.4%.
Yields instantly spiked down, more at the short end of the curve than at the long end, which makes sense since with a strong jobs report on Wednesday and now a soft inflation report today, the odds of another rate cut sooner than June would seem better.
In a mirror image of what happened on Wednesday, the 5-year and 10-year made low yields in the first minute following the news, which are still holding but they're being tested as I write this. It may be too early to know if they'll hold, but it's probably not too early to say that the weekly charts will look good heading into the long weekend. One wonders if there won't be questioning as to how both reports from the BLS could have come in so much better than expected, and I for one don't understand how 2 different calendars could show 2 different numbers for one of the components, but they are what they are.
The low yields made so far are still above what I think are the strongest nearby resistance levels in all 3 maturities, although yesterday both 5-year and 10-year yields did close below good resistance levels. That said, the most important resistance of all might lie just ahead for the 5-year.
After breaking out above a channel, which had contained 5-year yields for 4 months, in barely 2 weeks its yield has dropped 26 bps, leaving it just 3 bps above the trendline which defined the bottom of that channel, but that hardly tells the story of that trendline.
The value of it, which is drawn under yield troughs left on 9/11 and 11/25, the value of another one drawn under a yield trough left on 9/16 of 2024 and the one from 9/11 of last year, and a third one drawn under yield troughs left on 5/4/2023 and the one left on 9/16/2024, are all within a basis point of one another. That means that the rise in 5-year yields per day is the same if you calculate it from this past September, from the previous September, or from May of 2023, and those trends have never been broken even on an intra-day basis.
