August CPI, PPI and treasury yields ?3

10:31 11-Sep-26


August CPI numbers came in at +0.4% for the headline and 0.3% for Core, with the latter being a tenth above estimates.  However, as covered yesterday, the market already took stock of the situation with PPI and currency moves remain moderated and mixed.  The main thing that has responded this morning is FedWatch, moving up further to an almost 90% chance for a hike next week, though that is moderating back toward the levels documented by Esekla below.

It's the long term that is ever more concerning.  Yesterday's 30-year T-Bond auction results again had strong demand and were not market moving, despite pricing over 5.3%.  However, they do allow me to do some back of the envelope math.  At around $1.27T going forward, net interest expense alone should total over $800 per household per month.  National debt over $40T comes to over $300K for each household.  Given the old to young record reported at the beginning of the week and diesel prices hitting an all-time high over $6 the American financial and global situation will only get worse until real world automation becomes ubiquitous and federal fiscal policy is adjusted accordingly.

On 9/10/26 9:14 AM, Esekla wrote:
Atypically, the market is NOT ignoring PPI numbers for August which matched forecasts of +0.4% and +0.3% for the headline and Core respectively.  My take is that they increase confidence that CPI tomorrow morning will accurately reflect inflation heading well above 5% YoY, which in turn increases the chances that the Fed will follow the ECB with a rate hike next week.  Brent and WTI topping $105 and $100 are helping to tank American equity market futures as well.

I will only update on today's 30-year treasury auction results if they are market moving as dollar weakness has abated for the moment.  However, after some moderation, the traded 10-year T-Note yield is now above 4.86% and Norway is expected to begin reducing its treasury holdings next year.
On 9/9/26 1:46 PM, Esekla wrote:
Which brings us to the news I was waiting for.  Today's 10-year T-Note auction results show stronger demand but only at substantially higher yield of 4.834%, which will continue to cost tax payers, as discussed below.  Bessent may expand his bogus bond boondoggle and talk tough for the time being.  However, I don't need to bet directly against a house of sand; I'll just put my money elsewhere and wait for the tide, and I'm not alone.  The traded yield on T-Notes hovered just above my 4.8% pivot point ahead of the auction and rose to over 4.85% right after the results were released.

On 9/8/26 9:35 AM, Esekla wrote:
... price does matter, and it may matter more now that the world's share of seniors has surpassed young children for the first time in recorded history.  That is why administration officials talking about America growing its way out of debt hold no sway with me, and why the yield on long term auction tomorrow and Wednesday will be important over the longer run.  If those are high and the rise in the yen is hidden intervention, then I see reason to worry, regardless of the tenor or validity of Friday's CPI numbers.  For the moment, though, the chances of a rate hike have moderated several percent.  However, the real test may be whether or not data center support remains viable.