The U.S Bureau of Labor Statistics released November CPI figures which were largely in line with market expectations. The headline inflation rate came in at 0.0% for the month, a drop from October’s +0.2%, as rents, airfares, new car and medical prices rose while petroleum prices fell. The year-to-date figure was +0.4%, up from October’s comparable figure of 0.1% and in line with market expectations. Core inflation, which strips out the more volatile food and energy components, rose 2.0% over the last 12 months, up from October’s figure of 1.9%.
US bond yields went higher on the news; the yield on 2 year bonds rose 5bps to 0.98% and 10 year bond yields rose 9bps to finish the day at 2.29%. In the cash markets, the odds for an increase in the Fed rate rose slightly to around 80% as the latest inflation figures were seen as additional ammunition for the Fed to raise rates for the first time since 2006.
