Pricing of bond rally before CPI in the USA
While attention in global markets turned to the US CPI data, a bond rally was priced in the options market before the data.
The market is preparing for a bond rally before the critical US April consumer inflation data.
The options market is pricing in a drop in the US 10-year bond yield to 4.3 percent, down about 15 basis points from its current level.
Pointing out that there is a lot of positioning in both directions, R.J. “However, lately the tendency to position against the possibility of easing has been stronger,” commented Alex Manzara, a derivatives broker at O’Brien & Associates.
Economists expect US annual consumer inflation to decline slightly from 3.5 percent in March to 3.4 percent in April. Core inflation is expected to decrease from 3.8 percent to 3.6 percent.
According to economists, who point out that the producer inflation data released on Tuesday reflects the sharp decline in air travel prices, this may have a downward effect on core inflation and core PCE.