Following on the heels of a softer jobs report, the friendly consumer inflation (CPI) readings last week boosted asset prices. Falling yields and growing expectations of a possible economic soft landing fueled the rally. The 2-year U.S. Treasury yield fell from 5.06% to 4.89%, while the 10-year declined from 4.65% to 4.44%.
While the year-over-year CPI came in below expectations at 3.2%, that level is likely overstated due to the government’s measure of rent lagging the real world. While the shelter component of CPI rose at 6.7% year-over-year, Zillow reports that rents grew at a much lower 3.2% in October. This shelter component has over a one-third weight in the CPI calculation so it would be a meaningful difference.
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