Why Aren't Bonds Happier About CPI? For the 2nd month in a row, the market's reaction to a CPI/PPI report ended up being less about the report itself and more about its implications for the more highly regarded PCE inflation data. While we have to wait 2 weeks for official word on PCE, the CPI/PPI combination goes a long way toward revealing the outcome. In today's case, CPI suggested higher PCE inflation, so bonds ended up selling off, albeit modestly, despite core CPI coming in lower than expected. Thursday's PPI once again has the opportunity to punch above its typical weight for the same reason.  Econ Data / EventsCore M/M CPI 0.2 vs 0.3  f'cast. 0.5 prev unrounded 0.2266 Core Y/Y CPI3.1 vs 3.2 f'cast, 3.3 prev Market Movement Recap09:31 AM Weaker overnight and mixed reaction to CPI (mostly ignored). MBS down 1 tick (0.03) and 10yr up 3.6bps at 4.316 12:46 PM MBS up 1 tick (.03) and 10yr up 2.8bps at 4.308 03:41 PM Fairly flat in the afternoon, despite some noise in both directions.  MBS are unchanged and 10yr yields are up 3.6bps at 4.317