CPI data comes in below expectations, Fed July rate hike bets drop to 20%

Odaily Planet Daily News: Affected by consumer price data coming in lower than expected, traders have pulled back their bets on Fed rate hikes, driving a sharp rise in U.S. Treasury prices. The yield on the two-year Treasury note, highly sensitive to the Fed's short-term monetary policy outlook, fell as much as 14 basis points to 4.14%, marking its biggest single-day drop since February. Meanwhile, interest rate swaps show that the probability of a Fed rate hike in July has dropped from over 40% to around 20%.

Dan Carter, Senior Portfolio Manager at Fort Washington Investment Advisors, said: "This is an across-the-board miss on expectations. The possibility of a rate hike in the short term has vanished. The market had been worried that inflation data would come in too high, so this data should be positive for the bond market and cause the yield curve to steepen again. Our baseline expectation is that the Fed will hold rates steady, and this data confirms that view." (Jinshi)