Morning Notes — CPI and Bond Yields

As previewed, Treasury yields move lower despite this morning’s hotter-than-expected May CPI report. Core CPI increased +0.7% month-over-month in May vs. consensus for +0.5%, taking the year-over-year rate to +3.8% from +3% in April and above consensus expectations for +3.5%.  Ten-year yields at ~1.47% remain above strong support at ~1.45%.  Without a fundamental catalyst, the decline in yields this week has been largely technical and we expect the mid-1.40s will hold before yields move higher. Yesterday, the 10-year Treasury price put/call ratio (contrarian indicator) moved to extreme overbought territory.  Tactically, we expect yields to lift with new resistance at ~1.55% and again in the 1.62-1.64% range.