February PPI Rises 0.7% Monthly and 3.4% Yearly, Yields Spike
Wholesale PPI jumped 0.7% in February and is running at 3.4% year-over-year, its hottest pace since February 2024, while core PPI rose 3.9% Y/Y. Treasury yields climbed and the Dow fell 200 points on these hotter-than-expected readings ahead of today’s Fed rate decision.
1. February Producer Price Surge
Wholesale PPI jumped 0.7% month-on-month and 3.4% year-on-year in February, marking the highest annual pace since February 2024. Core PPI, excluding food and energy, rose 3.9% Y/Y, driven by a 4.2% jump in securities brokerage costs and a 1% increase in portfolio management fees.
2. Goods and Services Breakdown
Services costs led the monthly gain with a 0.5% rise, while goods prices climbed 1.1%. Food prices were up 2.4%, including a dramatic 48.9% surge in fresh and dry vegetable costs.
3. Market Reaction
Treasury yields climbed on the hotter-than-expected inflation data, fueling a 200-point drop in the Dow. Traders pushed rate-cut expectations to December and now price in potential rate hikes at upcoming Fed meetings.
4. Implications for TMV
As TMV provides triple inverse exposure to 20+ year Treasury yields, the spike in long-term rates and elevated inflation readings could bolster its performance if rates stay higher for longer.