The PPI number had some pipeline pressure underneath the surface, but the market liked the fact that the core rate was up only 0.1 percent,

The PPI number had some pipeline pressure underneath the surface, but the market liked the fact that the core rate was up only 0.1 percent.

Bond prices rose because the market was excited at the idea that the number of further rate hikes needed would not necessarily be large. The market is thinking that the Fed has two more rate hikes to go.

You got a favorable surprise on the CPI. We had the first decline in the core rate in 21 years. It just reminds the Fed, which said last week that the risks of inflation and deflation were almost equally balanced, that you still have some very residual deflation risk. And it ... supports the notion that the Fed might not have to raise interest rates at all next year.

You got a favorable surprise on the CPI. We had the first decline in the core rate in 21 years, ... It just reminds the Fed, which said last week that the risks of inflation and deflation were almost equally balanced, that you still have some very residual deflation risk. And it ... supports the notion that the Fed might not have to raise interest rates at all next year.

The bond market took this report as a sign that core inflation may be bottoming and the Fed may still be in the tightening business later this year.