UMBS are up 24 bps in the first hour of trading!   I would say “3 days in a row”, if I didn’t want to jinx it.  S&P Futures flat.

CPI y/y rose 3.4%; est. 3.4%

Core Month Over Month CPI = 0.3 vs 0.3 f’cast,    [0.4 prev]

Core Annual CPI = 3.6 vs 3.6 f’cast,     [3.8 prev]

Retail Sales = 0.0 vs 0.4 f’cast,     [0.6 prev]

Shelter index increased 0.4% in April after rising 0.4% in March

Owners’ equivalent rent of residence increased 0.4% in April after rising 0.4% in March; up 5.8% y/y

Unfortunately for those that were hoping for huge fireworks today, the as-expected core CPI headlines should result in the smallest possible movement.  Fortunately, that movement is in a friendly direction, helped along by the weaker Retail Sales print.

The government still thinks health insurance costs are falling (11% on a year-over-year basis) which makes no sense given that the drivers of medical costs (like hospital stays) are up 8%.

Jerome Powell said yesterday that this year’s uptick in inflation has been a surprise, however he doesn’t see the Fed raising rates and instead holding rates where they are for longer.

New Home purchase applications rose 22.1% in April compared to a year ag, according to the MBA. On a month-over-month basis they rose 2%. “New home purchase activity increased at a healthy pace in April 2024 after a slight pause in March. Applications to purchase newly constructed homes increased 22 percent over the year and have now shown annual gains for 15 consecutive months

In what can only be described as insanity, meme stocks such as GameStop, AMC, Blackberry, and Beyond Meat, are once again making headlines with their sudden rapid price appreciation. Monday, GameStop rose 74%, and AMC 78%. Since 5/1/24, GameStop is up a stunning 175%. This is probably a short squeeze as meme stock market fundamentals rarely change this fast. I’m watching from a distance but simultaneously recalling the 2021 carnage.

The much anticipated CPI data was perfectly in line with expectations of 0.3% month over month at the core level.  That’s a far cry from the 0.17% needed to sustain a 2.0% annual inflation target on average, but by avoiding another upside surprise, it was enough for bond traders today.  It also surely didn’t hurt that Retail Sales (which had added insult to injury last month) came in much lower than forecast (0.0 vs 0.4) with last month’s stellar 0.7% reading also being revised down to 0.6.  Bonds rallied sharply at first, and then gradually into the afternoon. As if by magic, 10yr yields hit the 3pm close at the same levels seen before the April 10th CPI data… like it never even happened…

UMBS closed up 41 bps at 100.80