Bond market awaits US inflation

The fate of the bond rally that started with the US employment data is expected to be determined by the CPI data to be released on Wednesday. US monthly consumer inflation is the leading factor affecting bond markets this year. The April inflation data to be released on Wednesday may also determine the fate of the bond rally that was caught after the nonfarm payrolls data that came in well below market expectations. According to Bank of America strategists, the rally that was caught after the employment data made the US CPI data more important. The strategists made the assessment that “The data could extend the rally or condemn bonds to another decline.” In the latest US CPI data released on April 10, the 10-year bond yield increased by 18 basis points as a result of the monthly CPI exceeding expectations, and that day, the biggest daily jump caused by a CPI data since 2002 was seen. Almost half of the 60 basis point increase in US bond yields this year was caused by the CPI data. “It is true that we are currently being dragged from one data release to another. We need to see disinflation coming for the rally to become permanent,” said Jonathan Cohn, Head of Strategy at Nomura Securities International’s US Rates Desk.