Good morning Asia,
Shall we have a little chat about what happened on Friday at 830pm HKT and go on to what to expect in Asia this week?
Let's go. US May CPI at 8.6%YoY & core higher at 6% & why that matters for the Fed on 15 June 2022.

First, markets expected CPI to go higher by 07%MoM but it blew that away at 1% increase in May v April. Moreover, if you exclude food & energy, it rose 0.6% over month so inflationary pressures aren't just in food & fuels. Meaning, we got core prices MoM from higher service costs

The last time headline inflation was within the Fed 2% target was February 2021 and we're June 2022 and so the Fed got an inflation problem.vWhy? Well, unemployment is low and inflation is high & even if the former is a lagging indicator, the Fed has to show its credibility. And?

Markets watched & digested & REPRICED Fed hikes higher. What does that mean? It means bonds SOLD OFF. And risk-free rate is now 3.31%for the 3-year US Treasury. Risk premium rises. Markets not only expects jumbo of 50bps in June but many more (futures implied rate is 3.17% end 22