Global Yields Freak Out

Global Yields Surge Worldwide 

A rough end to the week saw bond yields jump around the globe. In the US, mortgage rates matched the recent high of March 27. That is the worst place we have been since the start of the Iran Conflict. 10-year bond yields in the UK, Japan, and Germany are at multi-year highs and the US 10-year Treasury has been high since May 2025.    

CPI and PPI Run Hot 

It is due to the common villain: inflation. This week saw very hot Consumer Price Index (CPI) and Producer Price Index (PPI) reports. News out of China didn’t seem to provide any hope of progress in reaching a peace deal. There were hopes that China would be able to pressure Iran to reopen the Strait of Hormuz. 

Fed Faces Inflation Pressure 

The new Federal Reserve Chairman, Kevin Warsh, had his first day on the job this week. He will have a tough job keeping a lid on inflation, which could even lead to rate hikes. This is what markets are fearing.   

Retail Sales Beat Expectations 

Retail Sales rose 0.5% in April, in line with estimates. The control group, which strips out autos, gas, building materials, and food services, also rose 0.5%. That is 1/10^th hotter than expected. It could be that consumers are not necessarily buying more things but are spending more on what they are already buying due to higher energy costs. Either way, it is clear that consumers are still spending money in the US. 

CPI Inflation Stays Elevated 

The CPI for April showed a headline inflation at 0.6%. A hot but expected reading. Energy prices rose 3.8% and gas prices rose 5.4%. This made up 40% of the increase. Food rose 0.5%. The yearly headline inflation rose from 3.3% to 3.8%, slightly less than expected. The Core reading, stripping out food and energy prices, rose 0.4% in April and from 2.6% to 2.8% yearly. Both were slightly over expectations.   

BLS Data Gap Impacts Core 

It is worth noting that some of this Core acceleration is a statistical artifact. The BLS was unable to collect shelter data in October 2025 due to the government shutdown, and its rotating survey methodology is now catching up — six months later. That means part of April’s Core CPI spike is the BLS correcting its own data gap.  

PPI Shocked Markets Higher 

PPI for April was a major shock. Headline inflation was expected at 0.5%, but it came in at 1.4%. Yearly, it rose from 4.3% to 6%, while 4.9% was expected. It was almost exclusively due to the 16% rise in gas prices. Even the Core rate rose 1%, more than 3 times the estimate of 0.3%. Yearly, it rose from 4% to 5.2%. As we have discussed, wholesale inflation doesn’t always get passed on to consumers due to margin compression. If the wholesale level remains high, it will start to be felt by consumers and show up in the CPI numbers. 

Looking Ahead: Next Week’s Key Reports  

Next week, we get the minutes from Fed Chair Powell’s final meeting, and it will be an interesting insight into the record dissenters we saw. 

• Monday, May 18: NAHB Housing Market Index 

• Tuesday, May 19: ADP Weekly Employment Data, Pending Home Sales 

• Wednesday, May 20: 20-year Auction, Fed Minutes 

• Thursday, May 21: Housing Starts and Permits