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The US inflation numbers had something for everyone!

Consumer prices rose more quickly in December, the latest sign that the Federal Reserve’s fight against inflation may have stalled.

The Consumer Price Index rose 0.4 percent from November, and was up 2.9 percent from a year earlier, the Labor Department said on Wednesday. It was the fastest one-month increase in overall prices since February, driven in part by another sharp rise in the price of eggs and other groceries.

The “core” measure of inflation, which strips out volatile food and fuel prices to give a better sense of the underlying trend, was more encouraging: The index rose 3.2 percent from a year earlier after three straight months of 3.3 percent gains. Forecasters had not expected core inflation to slow.
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Inflation in housing — by far the biggest monthly expense for most families, and one of the most stubborn categories of consumer prices — has finally begun to ease: Shelter prices were up 4.6 percent in December from a year earlier, the smallest 12-month increase in nearly three years.

PerpetualDiscounts now yield 6.03%, equivalent to 7.84% interest at the standard equivalency factor of 1.3x. Long corporates yielded 4.62% on 2025-1-14 and since then the closing price of ZLC changed from 15.02 to 15.19, a total return of +1.13%, implying a decrease in yields (assuming that the “Duration” of 12.66 reported by BMO is Modified Duration) of about 9bp to 4.53%. Therefore, the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has widened slightly (and perhaps spuriously) to 330bp from the 325bp reported January 8.

This entry was posted on Wednesday, January 15th, 2025 at 9:02 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.