Question #
What information is available about July’s CPI Report?
Answer #
Not a green light for the Fed to cut, but not an extremely valid reason to hike rates either.
Then the last thing I attempt to gauge is the markets’ reaction.
Not the stock market, although I am very interested personally in it (my portfolio went up), but the stock market is very fickle.
The adult in the room is the bond market, and I was somewhat surprised.
Important number…5.24%.
That is where the 30-year Treasury bond sat before yesterday’s CPI report.
5.24%…that is where it sits at the close after July’s CPI report was released.
I am not an economist, but I think what this is telling us is the market doesn’t really care.
When your inflation report lands good and the long bond doesn’t give you an inch, that is the market telling you something.
The Congressional Budget Office reported yesterday that the federal government is now paying $3.18 billion a day just in interest on the debt.
At these yields, the tab does not shrink.
Not to get too political (well, maybe just a little), the Big Beautiful Bill is expected to have a 120-year cost of $5 trillion dollars.
The bond market is pricing in not just current inflation but the future supply of Treasury bonds needed to finance deficits of this size.
That is a structural headwind on long-term rates that doesn’t go away regardless of what the Fed does in September.
Now, remember, most people could care less what I think.
Source: What the Jobs Report, CPI, and Bond Market May Be Telling Us About Interest Rates
