Bonds traded on the back foot last week as benchmark rates sold off. The in-line November consumer price index (CPI) print solidified rate cut expectations for the upcoming Federal Open Market Committee (FOMC) meeting. However, the stalling of progress on the inflation front softened appetite for duration as uncertainties surrounding inflationary pressure in 2025 persist. Credits outperformed benchmark rates with spreads broadly ending the week 5-10 basis points (bps) tighter. Outperformance in credits was largely driven by year-end seasonality, which is keeping prices sticky amid swings in benchmark rates.

• The US CPI YoY was within the market expectations of 2.7%, which is higher at the previous month’s market expectations of 2.6%
• The US PPI YoY was higher than expected of 3.0%, compared to market consensus of 2.6%.
• Markets expected a 95.4% chance of this week’s interest rate cut as of December 16, according to Bloomberg. That is higher compared to December 10’s expectation of 85.8%.