Thu: PPI up 1.3 percent, retail sales led by gasoline, and the 10-year fell 10 basis points after an Asian sell-off.
Written Thursday October 15 after the close, covering Thursday October 15; no plan was registered, so nothing is graded. September PPI rose 1.3 percent (core 0.7) against a 0.5 percent consensus (BLS, FXStreet), and retail sales rose 0.8 percent with gasoline stations supplying $4.1 billion of the $5.7 billion gain and the control group up 0.1 (Census). The 10-year fell 10.1 basis points to 5.089 percent, almost all of it before 8:30 AM, as Asian technology stocks sold off (Kitco). DXY fell 0.54 and gold rose $65. Two hot inflation prints, and the 10-year is down 12.8 basis points over two sessions, all in real yields.
Written Thursday October 15 after the close, covering Thursday October 15. No plan was registered for Thursday. Producer prices rose 1.3 percent in September, the largest monthly gain since March 2022, and retail sales rose 0.8 percent. On the face of it, a second hot inflation print in two days. The 10-year yield fell 10.1 basis points to 5.089 percent anyway, the dollar fell and gold rose $65. Almost all of the bond move happened before 8:30 AM, during a sell-off in Asian technology stocks. Over two sessions with hot CPI and hot PPI, the 10-year is down 12.8 basis points.
This continues Wednesday's CPI note, where the plan's bond line missed because a hot-CPI jump in yields reversed by the close. Thursday took the reversal further.
What the data said
- Producer Price Index, September (8:30 AM ET). Final demand rose 1.3 percent seasonally adjusted, and 6.3 percent from a year earlier. Excluding food and energy, PPI rose 0.7 percent (5.0 percent on the year); excluding food, energy and trade services, 0.5 percent (source: BLS Producer Price Index; changes computed from BLS public data API series WPSFD4, WPSFD49104, WPSFD49116 and, for annual rates, WPUFD4 and WPUFD49104). Kitco reported energy up 10.8 percent and gasoline up 20.3 percent, and called the headline the largest monthly gain since March 2022. FXStreet put consensus at 0.5 percent for the headline and 0.3 percent for the core. For how producer prices feed consumer prices, see our guide to PPI versus CPI.
- Advance retail sales, September (8:30 AM ET). Sales rose 0.8 percent (±0.4) to $745.0 billion, and August was revised up to 1.3 percent from 1.1. Gasoline stations rose 6.4 percent and supplied $4.1 billion of the $5.7 billion increase; excluding gasoline stations, sales rose 0.2 percent, and excluding autos and gasoline, 0.2 percent. The control group (total less autos, gasoline, building materials and food services), which we computed from Census's seasonally adjusted Table 1, rose 0.1 percent (source: Census, Advance Monthly Retail Trade, September 2026). FXStreet put consensus at 0.3 percent for both the headline and the control group. Retail sales are in dollars, not volumes; our guide to retail sales versus inflation covers why a gasoline-driven headline says little about how much people bought.
- Initial jobless claims, week ending October 10: 199,000, up from a revised 198,000; the four-week average was 198,500. Continuing claims for the week ending October 3 were 1,710,000 (Department of Labor, via FRED ICSA, IC4WSA and CCSA). No change in the labour-market picture.
- EIA natural gas storage (10:30 AM ET), week ending October 9: a net injection of 67 Bcf to 3,567 Bcf, 143 Bcf below a year earlier and 45 Bcf above the five-year average of 3,522 Bcf (source: EIA Weekly Natural Gas Storage Report). We did not find a named consensus figure and report none.
- EIA petroleum (holiday-delayed to Thursday), week ending October 9: commercial crude stocks fell 8.6 million barrels to 415.6 million; gasoline rose 3.5 million and distillate fell 2.5 million (source: EIA Weekly Petroleum Status Report, Table 1).
Before New York opened
The bond market moved overnight. Kitco reported South Korea's Kospi down about 7.6 percent and Japan's Nikkei 225 down 4.9 percent, and tied the move to selling in heavily indebted AI-linked technology companies; European Business Magazine put the Kospi's fall at 7.9 percent. Kitco also reported that a container ship and a dry bulk carrier sank in the Strait of Hormuz after projectile attacks. We have these accounts from news reports only and did not verify them further.
The prices are not in doubt. The 10-year closed Wednesday at 5.190 percent and opened New York on Thursday at 5.081, 10.9 basis points lower, before either 8:30 AM release (Yahoo ^TNX). DXY was already down about 0.4 from Wednesday's 4:00 PM by 9:00 PM Wednesday evening. The hot PPI landed on a market that had already rallied.
The tape
| Market | Wed Oct 14 | Thu Oct 15 | Change | Two days (from Tue) |
|---|---|---|---|---|
| 10Y yield | 5.190% | 5.089% | -10.1 bp | -12.8 bp |
| 30Y yield | 5.525% | 5.429% | -9.6 bp | -13.4 bp |
| 5Y yield | 4.992% | 4.899% | -9.3 bp | -10.8 bp |
| DXY (4 PM ET) | 102.521 | 101.982 | -0.54 | -0.22 |
| Gold (GC=F, 4 PM ET) | 4,127.3 | 4,192.5 | +65.2 | +8.6 |
| USD/JPY (4 PM ET) | 158.31 | 158.08 | -0.23 | -0.24 |
| EUR/USD (4 PM ET) | 1.1159 | 1.1218 | +0.0059 | +0.0017 |
| Brent (BZ=F, 4 PM ET) | 106.06 | 105.73 | -0.33 | -0.63 |
| S&P 500 | 7,718.94 | 7,744.06 | +0.33% | -0.79% |
Sources: Yahoo Finance query1, hourly 4:00 PM ET bars for DXY, gold, USD/JPY, EUR/USD and Brent; daily closes for ^TNX, ^TYX, ^FVX and ^GSPC. DXY's daily close was 102.00. Brent's Thursday settlement was not final on Yahoo at writing, so the 4:00 PM bar is used.
Once New York opened, the bond market did little. The 10-year moved from 5.081 to 5.064 percent between the 8:20 and 8:50 bars, then drifted back up to close at 5.089, 0.8 basis points above its opening level. In the 8:30 to 9:00 AM window, DXY fell from 102.13 to 102.04, USD/JPY from 158.02 to 157.76 and gold barely moved (Yahoo 30-minute bars). The S&P 500 opened at 7,687 and closed 0.33 percent higher on the day. The curve flattened: 2s10s narrowed from 0.37 to 0.33 percentage points (FRED T10Y2Y), so the 10-year fell more than the 2-year. The 10-year breakeven fell from 2.35 to 2.32 (FRED T10YIE).
What the two days add up to
Hot inflation, lower yields. Core CPI at 0.3 percent and PPI at 1.3 percent are both above consensus, and both are the kind of print that, in isolation, pushes yields up. Across the two days the 10-year fell 12.8 basis points and inflation compensation finished a basis point below where it started. The fall was in real yields. That is the shape of a bond rally driven by demand for safety or by weaker growth expectations, not by a cooler inflation outlook; the guide to supply-shock versus growth-shock bond rallies sets out how to tell them apart.
The dollar went with rates on Thursday. DXY fell 0.54 as the 10-year fell 10 basis points: the usual direction. On Wednesday it had risen with yields falling. Two days, two different relationships.
What did not change. The Fed's recent message: Waller and Musalem said last week that further increases are likely needed. Kitco on Thursday put the chance of an October hike near 29 percent, citing fed funds pricing; we did not read CME FedWatch directly. Chair Warsh speaks with IMF Managing Director Georgieva at 11:30 PM ET Thursday (Federal Reserve calendar), after this note was written.
The Thursday-Friday note's breakeven statement
The October 8-9 note said: "If the 10-year breakeven (FRED T10YIE) stays at or below 2.33 through Thursday October 15 while Brent holds above $100, then the bond market is still treating the oil rally as a growth or risk-premium story rather than an inflation one. Wrong if the breakeven rises 3 basis points or more over that span." From 2.33 on October 9, the breakeven was 2.33 on October 13, 2.35 on October 14 and 2.32 on October 15; Brent stayed above $100 throughout. The falsifier (a 3 basis point rise) did not trigger, so the statement is not wrong. But the condition (at or below 2.33 throughout) broke on CPI day. We grade it not falsified, not cleanly met, and we do not count it as a hit.
What we do not know
- Whether the Asian sell-off caused the bond rally. The timing fits and Kitco made the link. Timing is not cause, and we have not seen flow data.
- Why the dollar fell. Lower US yields are the obvious candidate; but a weaker dollar during a global equity sell-off is not the usual safe-haven pattern: the dollar smile would predict the opposite.
- How much of the PPI was passed on. Energy drove the headline. Whether the 0.7 percent core reflects margins, freight or something that reaches consumer prices later is not answerable from one month.
What would change the read
A pre-registered map for Friday October 16 (import prices at 8:30 AM ET, industrial production at 9:15 AM ET) was committed to the repository on Thursday evening, before Warsh's remarks and Friday's data. Two conditional statements from this piece:
- If the 10-year closes below Wednesday's 5.190 percent on every session through Friday October 23 (the final October Michigan survey, 10:00 AM ET), then Thursday's rally was more than a one-night haven bid. Wrong if the 10-year closes at or above 5.190 on any session in that span.
- If the 10-year breakeven (FRED T10YIE) stays at or below 2.35 through Friday October 23 while Brent stays above $100, then the bond market is still not treating two hot inflation prints and oil as a lasting inflation shock. Wrong if T10YIE prints 2.38 or higher on any day in that span.
What to read alongside
- The Beige Book (the reference piece published with these notes)
- PPI versus CPI
- Retail sales versus inflation
- Supply-shock versus growth-shock bond rallies
Nothing on this site is investment advice or a recommendation to trade. Most retail traders lose money. Conditional statements published here are falsifiable hypotheses, graded in public, not signals.