Morning Notes — Setup into Thursday’s CPI

Markets are fairly quiet today and likely to remain that way until Thursday morning’s CPI report. Higher energy prices throughout January have markets braced for another uptick in headline and core CPI.  An above-consensus print will likely test 10-year yield resistance at ~1.98%.  We don’t expect a break above that level, but a close north of 2% should take us to the 2.05-2.15% range.  Most reports continue to suggest that Friday’s non-farm payroll gain of +467,000 should make the Fed incrementally more hawkish. But backing out seasonal adjustment factors takes the number closer to -40,000. Markets reflect the true number with slightly lower IG/HY credit spreads and a fading VIX Index.