Good Tuesday morning. As we covered yesterday it’s a big week for the inflation narrative. This morning we learned that the PPI came in a bit hot, even as it matched y/y estimates of 2.2% inflation, the monthly read of PPI (ex food and energy) came in at .5% vs estimates of .3%. Importantly…and this looks to be what the markets are keying on….the PPI was actually revised lower last month to a negative .1%.

The markets are taking it in stride, with the Dow Jones higher by 50 points and gold up $12/oz to $2355. 

Tomorrow we’ll get the CPI…the biggie….which is expected to show underlying inflation rising 3.6% y/y, which would be the smallest increase in over three years.

We continue to think that the markets are discounting the inflation story, with utility stocks going parabolic (as the largest borrowers in the country, utility stocks are as rate sensitive as you can get) and with 10 year yields falling over the last 3 weeks from 4.73% to 4.48% this AM. 

We see the same kind ...