The recent trend of Treasuries inversely to stocks continued today as some positive retail earnings fueled an rally in equities that lead Treasury prices slightly down.
PPI Down… TIPS Rally?
A .9% month over month decline in the PPI for July was all but ignored by the market – the index was down 6.8% from July of 2008. Consensus was calling for a .3% decline MoM but yields moved higher across the curve despite the deflationary data, and TIPS outperformed nominal Treasuries by 62 basis points. There are a few possible reasons for the atypical TIPS behavior. One is that the market is looking past yesterday’s data, concentrating more on what is to come on the inflation front. Another reason could be energy fears tied to the storm activity in the Gulf of Mexico – oil was up 5% yesterday. 10-year breakevens widened by seven basis points in Monday trading.
Cliff J. Reynolds Jr., Investment Analyst
PPI Down… TIPS Rally?
A .9% month over month decline in the PPI for July was all but ignored by the market – the index was down 6.8% from July of 2008. Consensus was calling for a .3% decline MoM but yields moved higher across the curve despite the deflationary data, and TIPS outperformed nominal Treasuries by 62 basis points. There are a few possible reasons for the atypical TIPS behavior. One is that the market is looking past yesterday’s data, concentrating more on what is to come on the inflation front. Another reason could be energy fears tied to the storm activity in the Gulf of Mexico – oil was up 5% yesterday. 10-year breakevens widened by seven basis points in Monday trading.
Cliff J. Reynolds Jr., Investment Analyst
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