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

Odaily Planet Daily News: Affected by consumer price data falling short of expectations, traders have withdrawn their bets on a Fed rate hike, prompting a sharp rise in U.S. Treasury prices. The two-year Treasury yield, highly sensitive to the short-term monetary policy outlook, once fell by 14 basis points to 4.14%, marking its largest single-day drop since February. Meanwhile, the interest rate swap market indicates that the probability of a Fed rate hike in July has fallen from over 40% to around 20%.

Dan Carter, Senior Portfolio Manager at Fort Washington Investment Advisors, said: "This is a broadly below-expected data performance. The possibility of a near-term rate hike has vanished. The market had been worried that inflation data would be too high, so this data should be positive for the bond market and prompt a steepening of the yield curve. Our baseline expectation is that the Fed will keep rates unchanged, and this data confirms that view." (Jinshi)