The latest U.S. inflation reading on Wednesday showing the consumer price index (CPI) going up at a 2.6 per cent rate didn’t impact the bond market all that much because the market is focusing more on the looming Donald Trump presidency.
That’s according to Ed Devlin, founder of Devlin Capital, former portfolio manager at PIMCO and a Senior Fellow at the C.D. Howe institute, speaking in an interview with BNN Bloomberg on Wednesday.
Devlin said there wasn’t much to surprise the bond market in the CPI data released this morning, numbers which showed the headline rate come in at 2.6 per cent and the core rate come in at 3.3 per cent, both bang on expectations.
“The bond market was bracing for the worst and when it hit on the screws you had a relief rally there,” he said.
Devlin says the market reacted to the numbers with a shrug because the bond market is looking down the road as it always does. “Inflation is not the primary concern,” he said. “The real focus is on the new Trump administration.”
While Donald Trump has named a few members of his cabinet, some of the more prominent financial roles such as treasury secretary, commerce secretary and the trade file are still unknown. If the new president makes any off the board picks there, Devlin said “You could see a strong market reaction.”
As Canadian businesses are feeling anxious over the prospect of tariffs, Devlin thinks many outcomes are on the table including one where they are mostly just a negotiating tactic.
“Will his second term be different from first? We all just have to wait and see,” he said.