CPI Slightly Lower Spurs Yields to Drop: 10Y @ 4.05%, 30Y @ 4.695% (02-14)

The 1-month consumer price index (CPI) unexpectedly rose 2.4% year-over-year, slightly below economists' 2.5% forecast, with core inflation in line with expectations. The report, delayed by a partial government shutdown, lessened concerns of inflation resurging and prompted a reassessment of Federal Reserve policy. Yields in Treasuries retreated on the data: the 10-year yield fell 5 basis points to 4.05%, the 30-year yield declined 3 basis points to 4.695%, and the 2-year yield dropped 6 basis points to 3.406%. Lower yields reflect tighter risk-off sentiment and expectations of slightly less hawkish policy. This week also saw the nonfarm payroll add 130,000 jobs, well above the 55,000 median forecast and improving on the revised 48,000 for December. While recent labor data have strengthened, the CPI result keeps the door open for further Fed easing in coming months, though fiscal stimulus and sticky inflation could temper that outlook.