BONDS: Another round of Heavy selling going through

Fed pricing sees a modest dovish reaction to the CPI data, although the readings provided little differentiation vs. headline BBG survey expectations on net (but did include a 0.1ppt downside surprise for unrounded M/M core CPI & a 0.1ppt upside surprise for unrounded headline CPI).

• Unrounded supercore was pretty close to the average of a limited survey sample, with our macro team noting that it was core services that limited inflation, while core goods provided a slightly hawkish surprise (see previous bullets for greater details on the release)
• A reminder that hawkish adjustments were seen ahead of the data, after Treasury secretary Bessent’s left some feeling that there may have been a more hawkish surprise in the offing.
• We suggested that he may have just been referring to a roughly in-line print given consensus expectations for a move higher across the major CPI metrics vs. May levels. This seems to have been proven true.
• FOMC-dated OIS shows 1bp of easing for this month’s decision, 16bp through September, 31bp through October and 47bp through year-end.
• That compares to 1bp, 15bp, 29bp and 46bp ahead of the data and 1bp, 17bp, 31bp and 49bp before Bessent spoke.
• SOFR-implied terminal rate pricing at 3.22% vs. 3.25% ahead of the data and 3.23% pre-Bessent (corrected from 3.33% when previously published).

Fed pricing sees a modest dovish reaction to the CPI data, although the readings provided little differentiation vs. headline BBG survey expectations on net (but did include a 0.1ppt downside surprise for unrounded M/M core CPI & a 0.1ppt upside surprise for unrounded headline CPI).

• Unrounded supercore was pretty close to the average of a limited survey sample, with our macro team noting that it was core services that limited inflation, while core goods provided a slightly hawkish surprise (see previous bullets for greater details on the release)
• A reminder that hawkish adjustments were seen ahead of the data, after Treasury secretary Bessent’s left some feeling that there may have been a more hawkish surprise in the offing.
• We suggested that he may have just been referring to a roughly in-line print given consensus expectations for a move higher across the major CPI metrics vs. May levels. This seems to have been proven true.
• FOMC-dated OIS shows 1bp of easing for this month’s decision, 16bp through September, 31bp through October and 47bp through year-end.
• That compares to 1bp, 15bp, 29bp and 46bp ahead of the data and 1bp, 17bp, 31bp and 49bp before Bessent spoke.
• SOFR-implied terminal rate pricing at 3.22% vs. 3.25% ahead of the data and 3.23% pre-Bessent (corrected from 3.33% when previously published).

• 10,000 SFRZ5 96.25/96.50/96.75/97.00 call condors, 4.0 net ref 96.125 at 0857:04ET