Tomorrow, when the CPI is released, could be a key day for bonds; it could determine if the auction play will work. Economists are expecting a strong headline gain of 0.6%, but that will be mostly related to the price of gasoline. The core rate is expected to be 0.2%. If it is less than expected, expect a stronger move in bonds. If higher than expected, the bond market could give back all of the gains this week.
This could be a big deal tomorrow. Of course, it could also be no deal at all if the number is as expected.
Dwight Johnston is the chief economist of the California and Nevada Credit Union Leagues and president of Dwight Johnston Economics. He is the author of a popular commentary site and is a frequent speaker at credit union board planning sessions and industry conferences.