A 0.6% CPI broke the four-record streak
April CPI printed +0.6% MoM and +3.8% YoY — well above consensus of +0.3% / +3.4% and the highest YoY reading since May 2023. Energy did over 40% of the work; gasoline alone ran +18.5% YoY. The 10-year ripped 10 bps to 4.58% (a 1-year high), the 30-year to 5.20%, the 2-year +17 bps to 4.05% — the entire curve shifted up, not just the long end. Equities slipped 0.37% (S&P) / 0.65% (Nasdaq); Brent extended +3.83% to $108.30 on the inflation-pass-through narrative. Today’s calendar: PPI 08:30 ET plus the Senate Chair confirmation vote for Warsh.
+3.8% YoY
Apr CPI · headline
+0.6% MoM · highest since May '23
4.58%
US 10-Yr
+10 bps · 1-year high
$108.30
Brent (Tue close)
+3.83% · CPI compounds Iran shock
7,385.41
S&P 500 (Tue close)
−0.37% · first red day after 4 ATHs
The Hormuz pass-through is now a Fed problem
April CPI confirmed the thesis the bond market has been pricing since Monday. Headline +0.6% MoM, +3.8% YoY (highest since May 2023); core +0.4% MoM, +3.4% YoY. The energy index contributed roughly 40% of the monthly all-items increase — gasoline +18.5% YoY, energy services +12.2%. Strip those out and core goods are still in disinflation (used vehicles −0.5%, new vehicles +1.2%); but services keep grinding higher (transport +5.2%, shelter +3.5%), meaning even a Hormuz deal next week wouldn’t immediately solve the print. The 2-year yield ripped 17 bps and the 10-year hit 4.58% — a 1-year high — as Sept-cut OIS collapsed from 55% pre-print to under 25% by the close.
The Fed-chair handover sits awkwardly inside this. Warsh cleared the Senate yesterday 51–45 for the Fed board (only Sen. Fetterman crossed lines); the Chair confirmation vote is keyed for today, with Powell’s term ending Friday. Warsh inherits a market pricing a sustained oil shock, a curve at year-highs, and a Sept-cut window narrowing fast — without the option of leaning hawkish in the first six weeks (which would amplify the recession risk underneath the inflation). Equities slipped but didn’t break — the S&P sits within 0.4% of last week’s ATH; the bond market is doing the actual repricing.
Yields up across the curve · risk-off but contained
Yields ripped across every tenor; the dollar firmed; equities slipped without breaking; commodities extended on the inflation-pass-through narrative. The cleanest single-asset read on the day is the 2-year +17 bps — front-end caught up to the long-end’s prior back-up, in the way only an inflation surprise can do it.
+3.8%
Apr CPI · headline
+0.6% MoM — highest YoY since May 2023
4.58%
US 10-Yr
+10 bps — 1-year high
$108.30
Brent (Tue close)
+3.83% — Hormuz pass-through
15.50
VIX
+7% — hedge bid on CPI shock
| S&P 500 | 7,385.41 | −0.37% |
| FTSE 100 | 8,754.18 | −0.50% |
| DAX | 24,287.50 | −0.29% |
| Nikkei 225 | 42,025.60 | −0.44% |
| Hang Seng | 26,396.10 | −0.44% |
| VIX | 15.50 | +7.04% |
| Brent Crude | $108.30 | +3.83% |
| WTI Crude | $101.20 | +4.01% |
| Gold | $4,575.00 | +0.65% |
| Silver | $73.30 | +0.69% |
| Nat Gas (NYMEX) | $5.32 | +5.98% |
| US 2-Yr | 4.05% | +17 bps |
| US 10-Yr | 4.58% | +10 bps |
| US 30-Yr | 5.20% | +11 bps |
| Bund 10-Yr | 2.78% | +9 bps |
| UAE 10-Yr eurobond | spread wider | +9 bps |
| EUR / USD | 1.0708 | −0.28% |
| USD / JPY | 152.78 | +0.39% |
| USD / AED | 3.6725 | 0.00% |
| US Dollar Index | 98.85 | +0.30% |
| Bitcoin | $82,460 | −1.61% |
Where the hot CPI came from
Chart of the Day
Where the hot print came from
April CPI by component, year-over-year. Gasoline (+18.5%) and energy overall (+12.2%) did the heavy lifting; transport services (+5.2%) and food (+4.1% / +2.8%) the structural drags. Goods are still doing the disinflation work — used vehicles −0.5%, new vehicles +1.2% — but they're getting drowned out by the Hormuz pass-through and sticky services.
Source: US Bureau of Labor Statistics — April 2026 CPI release. All-items headline +3.8% YoY, highest since May 2023.
What carried the week's tape
Fed
Warsh confirmed to Fed board 51–45; Chair vote today
Kevin Warsh cleared the full Senate 51–45 last night with Sen. Fetterman (D-Pa.) the only Democrat crossing lines. The Chair confirmation vote is keyed for today; assuming it lands cleanly, Warsh takes the desk Friday when Powell's term ends. The 30-year sat 11 bps higher on the day even before the Chair vote — the curve is now pricing a handover into a hot-CPI environment, not the smooth transition that was priced six sessions ago.
Reuters · Al Jazeera · CNBC · Tue 12 May
Macro
September-cut OIS through 25% from 55% in a single session
Pre-CPI, OIS implied a 55% probability of a Fed cut in September. By the close yesterday, that had compressed to under 25%; the December meeting now prices ~40% odds of any cut for 2026 at all. The 2-year yield's +17 bp move was the biggest single-day rate-cut re-pricing since the April FOMC; if PPI today confirms the inflation pass-through, expect the December odds to compress further.
CME FedWatch · Bloomberg · Tue 12 May
Geopolitics
Trump: "massive life support" — Brent through $108
President Trump escalated his framing from Monday's "life support" to Tuesday's "massive life support" on the US–Iran ceasefire. Brent extended its rally, settling at $108.30 (+3.83% on the day, +7% since Friday's close). Hormuz throughput slipped to ~4.2 mb/d as commercial transit anticipates US escalation; the indicator stays RESTRICTED but is trending toward CLOSED for the second time this month.
CNBC · AP · Reuters · Al Jazeera · Tue 12 May
Aramco caught the inflation bid; GCC banks felt the curve
The CPI surprise hit MENA in two opposite directions yesterday. Aramco closed +2.8% in Riyadh on the Brent extension, ADNOC +2.4%, and oil-linked GCC ETFs saw the largest single-day inflows since the start of the war. The defensive carry trade is working. On the other side, GCC banks gave back 1.1–1.6% — the long-end rate back-up in dollars is pricing through into local-currency duration risk, particularly for banks with large UAE/Saudi sovereign holdings. UAE 10-year eurobond spreads added a further 5 bps to a cumulative +9 bps reversal of last week’s tightening; Saudi 5-year CDS lifted 4 bps.
The structural read for the rest of the week is that the GCC has now decoupled into two sub-trades: oil-linked equities (carry trade as long as Brent > $100 + Hormuz RESTRICTED) and rate-sensitive banking + real-estate (under pressure as long as the 10-year holds above 4.50%). DFM banking sub-index is now trading at the cheapest forward-P/E multiple since the conflict began; if PPI today and the Warsh vote outcome both lean dovish, the bank trade is the cleanest snap-back into Friday.
Aramco (Tue close)
+2.8%
Biggest single-day in 6 sessions
DFM banks sub-index
−1.4%
Cheapest fwd-P/E since conflict began
UAE 10-yr eurobond
+9 bps cumulative
Widening back through last week's level
Three reads on the post-CPI tape
A 17-bp move at the 2-year is not noise — it’s a single-session re-pricing of the entire 2026 rate-cut path. PPI today and the Warsh chair vote will tell us whether yesterday’s print was a one-time energy shock or a regime shift.
Trade 01
The bear-steepener became a parallel-shift higher
Yesterday's curve was led by the long end; today's was led by the 2-year. When the front end catches up to the back end in a single CPI print, the curve isn't pricing growth risk anymore — it's pricing a Fed that's stuck. Watch 2s10s: if it inverts back through 50 bps before Warsh's first meeting, the recession-risk hedges in the credit market are about to repurpose.
Trade 02
PPI today is the confirmation print
April PPI consensus is +0.3% MoM headline / +0.3% core. A reading above 0.5% confirms the inflation pass-through is broader than energy; a reading below 0.2% says CPI was a one-time gas-pump spike that won't repeat. The bond market is positioned for the former; the smarter trade is to scale into the second-derivative read — services PPI, which doesn't have an energy excuse.
Trade 03
Warsh inherits the least flexible Fed setup in a decade
The new chair takes the desk Friday with the 10-year at a 1-year high, oil at $108, Sept-cut OIS under 25%, and an Iran rejection that's still escalating in rhetorical terms. Any first-six-weeks hawkish lean amplifies the recession risk underneath the inflation; any dovish lean validates the curve's worst-case re-pricing. The first FOMC under Warsh isn't until mid-June — expect rate vol to stay bid through that window.