Bonds Seeing ‘Classic Flight to Quality,' Says JPM's Berro

• Yesterday's inflation data initially led to higher yields and increased probability of an October rate hike.
• The market is currently pricing in 4-5 rate hikes, which is more hawkish than even the most hawkish Fed committee member's projections.
• The recent selling pressure in the bond market, which intensified from September into October, is now showing signs of 'exhaustion'.
• A 'classic flight to quality' into the Treasury market is observed, suggesting a stabilization of yields and a return to more realistic pricing, following similar trends in DM yields outside the US.

Kelsey Berro analyzes the bond market's reaction to recent US CPI data, noting that while initial inflation data caused a knee-jerk reaction of higher yields, the market's aggressive pricing of future rate hikes is now exhausting itself. She highlights a 'classic flight to quality' into the Treasury market, indicating a stabilization of yields and a return to more realistic pricing.