Asia equities started the trading session on the back foot following the losses in global equities driven by the negative sentiment in Wall Street, where inflationary concerns came true as US Consumer Price Index printed its highest level since 2009. The hot data pushed US bond yields higher and triggered a substantial sell-off across risk assets as the stock markets worldwide.
In Wall Street, the US CPI print sparked a negative reaction across markets on fears the Federal Reserve may act sooner rather than later, sending US bonds downward with the 10-year Treasury note back around 1.69%. For the coming weeks, it is worth keeping an eye on high-frequency data such as housing costs, primary rents, and owners’ equivalent rent as the market started to reprice its inflation expectations. Suppose inflation starts to push to levels incompatible with the mandate. The Fed might use tools to bring it down like the bond tapering rhetoric and possibly some implementation of Yield Curve Control if nominal and real interest rates keep pushing higher to the repricing of inflation expectations.
