Sticky inflation and fiscal risk behind bond yield climb, says Fidelity's Timmer
Fidelity's Timmer says sticky inflation and fiscal risk drove bond yields up, though yields eased last week.
The US September import price index rose 1.1% (consensus 0.8%) and export prices rose 2.2% (expected 1.0%).
This week has been a difficult one for inflation data. Market participants think the Fed can rein in inflation by waiting until December, but the imported inflation is considerable and will keep affecting prices for some time.
The import and export price indexes are released each month by the Bureau of Labor Statistics. These gauges track the prices that US customers pay for foreign products and services, as well as the prices that international buyers pay for American goods. Although the data seldom moves markets on its own, it provides a valuable window into how the dollar, global commodity prices, and foreign producers' expenses are affecting the US economy. It is worth highlighting that import prices are measured without tariffs and duties. Consequently, the series offers a clear view of whether foreign exporters are absorbing tariff costs or transferring them to consumers. The index also functions as one of the inputs for adjusting trade figures in GDP calculations.
Energy was the main driver of the 0.7% rise in import prices in August. Import fuel prices were 26.8% above their year-earlier level, and natural gas import prices more than doubled with a 102.6% jump. Export prices increased 8.6% in the 12 months through August. China was an exceptional case: import prices from China rose 1.0% in August, the largest monthly gain since the data collection began in January 2004.
The September numbers come after two other high inflation readings this week. The headline CPI rose to 3.7% year-on-year, above the 3.6% forecast, while core CPI hit 2.6% against a 2.5% prediction, with a monthly gain of 0.33%. Energy prices climbed 5.2% over the month, and a 9.1% rise in gasoline accounted for more than half of the total increase. The producer price index was even more extreme. Producer prices advanced 1.3% month-on-month and 6.3% year-on-year, far surpassing expectations of 0.5% and 5.3%. That monthly increase was the largest since March 2022, and the annual rate was the highest since December 2022.
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Fidelity's Timmer says sticky inflation and fiscal risk drove bond yields up, though yields eased last week.
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