The initial reaction to this morning’s CPI data has been mixed with weakness initially and now some resilience.  Treasuries are underperforming, partly due to yield curve steepening (longer-term yields rising relative to shorter-term yields), but also perhaps with an eye on forthcoming supply.  Whether we’re looking at Treasuries or MBS, both are disappointingly close to unchanged levels given the build-up to this data. 

That said, one need not be disappointed by bonds continuing to hold 80% of the rally that’s taken place since October.