Yesterday the market was busy adjusting positions ahead of the CPI release, with Bloomberg reporting on a record SOFR futures block trade at the New York open, followed by rising prices/falling yields, indicating that the trades were buying funds, while 2-year U.S. Treasury yields were trading at key 4.75-4.80% remains stable and has not yet broken through further.

At the same time, White House economic adviser Brainard said in an interview with CNBC that the government still expects inflation to continue to progress steadily in the coming months. Some people believe that she has known the data results in advance, so traders interpreted this as an upcoming release. The inflation data could be close to market expectations, or just slightly higher.

At the same time, State Street, a large asset management company, predicts that it will cut interest rates by 50 basis points as early as June. The market currently predicts that the possibility of an interest rate cut in June is still close to 50-50. State Street’s forecast appears to be more radical, and is consistent with Apollo’s belief that the Federal Reserve will not even cut interest rates this year. The view that interest rates will be cut is in sharp contrast. It can be said that there are considerable differences in the current market views on the Fed.

The stock market fluctuated sharply. The SPX index fell sharply by more than 1% from high to low, causing traders to discuss whether anyone had learned the results of todays CPI data in advance. Subsequently, prices slowly recovered and accelerated at the close. The SPX once again held 200 daily moving average, while traders have adjusted their positions in anticipation of the release of the inflation data.

Prices across many asset classes are currently trading around important technical levels, with the SPX hovering and holding its 200-day moving average and 2-year yields holding steady around this year’s highs around 4.80%, with the Bank of Japan recently reaffirming its hawkish comments (UEDA: (hoping to eventually reduce Japanese government bond holdings), USD/JPY also held near two-year highs around 152. While we have no particular view on the CPI data, we believe that traders should be fully hedged by now, and it is rare for multiple asset classes to break through important technical levels at the same time, so we are inclined to believe that the data results will be close enough to market forecasts. Allowing the asset to maintain its current trend. Lets take a look at the market situation in 12 hours. Good luck to everyone!

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