CPI "Not as Hot" as Wall Street Expected, Crude Oil's Impact on Fixed Income

• March CPI was hot (0.9% M/M headline, 3.3% Y/Y headline) but 'not hotter than expected,' with core CPI showing 'some improvement.'
• Higher oil and gasoline prices (gasoline up 21%) due to Middle East tensions are a key concern, potentially acting as a 'tax on the consumer' and affecting the economy.
• Fixed income strategy recommends an 'up in credit quality bias,' focusing on investment-grade corporate and municipal bonds, and maintaining a benchmark duration (around 6 years) to mitigate interest rate risk.

The March CPI print was higher than the prior month but slightly better than expected, leading to a mixed market reaction. While core inflation showed some improvement, elevated oil and gas prices due to geopolitical tensions remain a concern for consumer spending and the broader economy. Investors are advised to adopt a cautious 'up in credit quality' bias in fixed income, focusing on investment-grade bonds and a benchmark duration of around six years.