Yields Spike As Producer Prices Explode Higher In April

After yesterday’s hotter than expected CPI (driven in large part by Energy, but seeing some contagion into Services costs), this morning’s Producer Price print for April was expected to show a major surge in annual wholesale inflation.

With the eight straight monthly increase, PPI rose by a massive 1.4% MoM (vs +0.5% MoM exp) – the biggest MoM jump since March 2022, lifting PPI by a stunning 6.0% YoY (vs 4.8% YoY exp). That is the hottest PPI YoY since Dec 2022…

Source: Bloomberg

Services and Energy saw the biggest rise (while construction costs actually deflated very modestly)…

Core Producer Prices spiked 1.0% MoM (more than triple the +0.3% exp) smashing Core PPI YoY up 5.2% (also the hottest since Dec 2022)…

Source: Bloomberg

And finally, one could argue this is as bad as it gets for the energy component as oil prices have stabilized…

Source: Bloomberg

But of course, the pipeline of those energy costs is perhaps only just starting to trickle into the rest of the economy.

PPI triggered a spike in 2Y yields…

Now back above 4.00% at their highest since March, as Warsh rate-cut hopes evaporate.