At a sensitive moment, tonight's US CPI arrives "fashionably late"

Investors are anxiously awaiting the delayed September CPI inflation report due this Friday, which will be the only key economic data available at this time.

On Friday, the U.S. Bureau of Labor Statistics is set to release the postponed September CPI data. According to a previous research report by Goldman Sachs, September CPI is expected to rise 0.33% month-on-month and 3.02% year-on-year, while core CPI is expected to increase 0.25% month-on-month and 3.05% year-on-year.

Previously, Wall Street Journal mentioned that the U.S. Department of Labor had originally paused work related to the CPI report due to the government shutdown emergency plan, but the U.S. Social Security Administration needs the third-quarter CPI data to calculate and announce the annual cost-of-living adjustment (COLA) before November 1.

During the regular economic data vacuum, U.S. Treasury yields have continued to decline this month. George Catrambone, head of fixed income at DWS Group, warned that if the CPI data comes in higher than expected, long-term rates may face upward pressure.

Market Anxiety in Data Vacuum

The ongoing U.S. government shutdown since October 1 has left investors in a data drought.

Catrambone stated in a phone interview on Wednesday:

In the absence of hard data that the market is accustomed to referencing, the market is in a tense state, as this data would normally provide some insight into the direction of the U.S. economy.

The U.S. Bureau of Labor Statistics had originally planned to release the U.S. employment report for September in early October, but it was not published due to the government shutdown. The ongoing shutdown also means that U.S. government employees cannot collect the new information needed for the employment report covering October next month.

Catrambone said:

We are not receiving regular data releases as we usually do; Friday's CPI data will be helpful, but it is actually just part of the puzzle.

Inflation Data May Trigger Yield Volatility

Catrambone warned that if the CPI data is strong, it could lead to a slight rebound in long-end bond yields.

The yield on the 10-year U.S. Treasury bond has declined this year, with the recent drop reflecting "risk-off sentiment," partly related to credit concerns arising from regional banks.

Catrambone believes that if the 10-year U.S. Treasury yield falls below 3.75%, it will indicate that investors are beginning to question whether the U.S. economy can achieve a "soft landing."

Ian Lyngen, head of U.S. rate strategy at BMO, noted in a report on Wednesday that the 10-year and 30-year Treasury yields have further room to decline in the fourth quarter. Lyngen stated:

The U.S. rate market continues to maintain a bullish trend in bonds, indicating strong underlying buying interest. The increasing economic uncertainty reinforces the rationale for increasing duration exposure at current levels.

Goldman Sachs economists, in a report dated October 18, projected that Friday's CPI report would show a month-on-month increase of 0.33% in September inflation, with a year-on-year growth rate of 3.02%. They forecast a month-on-month increase of 0.25% in core inflation, with a year-on-year growth of 3.05%