Stocks Week Ahead: Inflation Swaps Suggest CPI Could Come In Hotter Than Expected
This week will be dominated by inflation data and the bond auction returning to the 1 PM ET time slot. Today, a 3-year Treasury auction will be at 1 PM ET.
Tuesday will release the highly anticipated CPI report, estimated to have increased by 0.4% m/m, up from 0.3% last month and 3.1% y/y, in line with January. Core CPI is increasing by 0.3% m/m, down from 0.4% in January, while rising by 3.7% y/y, down from 3.9%. The 10-year Treasury auction will follow at 1 PM ET.
Wednesday will bring the 30-year Trueasry auction at 1 PM, while Thursday brings retail sales, estimated to have increased by 0.8% m/m in February versus a decline of 0.8% in January. Also, on Thursday morning, we get PPI, which is expected to have increased by 0.3% m/m flat to last month and increase by 1.2% y/y, up from 0.9% in January. Finally, Friday is the University of Michigan with preliminary March data showing 1-year inflation expectations have risen to 3.1% from 3.0%, and 3 to 5-year expectations have risen from 3% to 2.9%.
As previously noted, inflation swaps and Kalshi suggest that inflation will be hotter than expected on Tuesday morning. Both predict numbers to come in 0.1% hotter than the median analysts’ forecast, at 3.2% y/y and 0.5% m/m.
Since July, the actual CPI rate has met or beaten the CPI swaps 7 out of 8 times, except for November. Meanwhile, the actual CPI rate has met or beaten analysts’ median forecast 5 out of 8 times.
For the most part, the CPI Swap market has just done a better job predicting the y/y inflation rate over the last several months. This suggests that if the swap market is right again, we could see a CPI y/y print of 3.2% or higher come Tuesday morning. So, we will need to watch these numbers closely.
Remember, the
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