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Capital Markets Comment: UST10 at 4.31% this morning, +4bps from last week’s report. Renewed concerns about inflation push rates slightly higher.The big story this past week was the PPI, released on Thursday 8/14. The report showed higher than expected inflation readings with prices up 3.3% in the Final Demand YoY measure (vs 2.3% in the prior month, and 2.5% expectation), and 3.7% excluding food and energy YoY (vs 2.6% in the prior month, and 3.0% expectation). Several analysts suggested that this was the largest monthly increase in over three years, and possibly reflective of the impact of tariffs. Earlier in the week, CPI showed a month over month level of 0.2%, pretty much in line with market survey, and down slightly versus last month. Excluding food and energy, the figure was 0.3%. On a year-over-year basis, inflation was 2.7%, slightly lower than the market’s expectation of 2.8%, excluding food and energy, we have a 3.1% reading, slightly higher than market expectation of 3.0%. With inflation beginning to show in the PPI readings, expect that to filter through to the consumer soon. Combined with a softening jobs market, we see rate cut expectations lowered a bit to 83% chance of 25bps cut at September FOMC meeting.
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