A little calm seems to have returned to French government bond markets, where 10-year yields ended yesterday some 10bp off the intra-day highs. We do not think we’ve seen the last of the stress here, but for today the attention switches squarely to the US. The first big release of the day is the May CPI data, where there is a firm consensus around a 0.3% month-on-month core CPI reading. That is not good enough for the Federal Reserve’s 2% inflation target, but not bad enough to pare back expectations for Fed easing any further. Looking at the consensus figures, if there is a risk to today’s core CPI number it is to the downside – to 0.2% month-on-month. Perhaps some economists expect Owners’ Equivalent Rent – the intangible component with a 40% weight in the core CPI basket – to finally come lower.
After the excitement of the May CPI release, investor attention turns to the Fed…
