Why did the much stronger-than-expected CPI data not spark market volatility?

　　Bond traders were once again in a difficult position after the latest inflation data, which did not seem to provide guidance.

　　Treasury yields moved briefly after the release of the BLS consumer Price Index (CPI) data, but those gains were quickly erased, although a rebound in three of the four data points suggested a negative inflation outlook. Overnight index swaps (OIS) pricing suggests traders are pricing in 15 basis points of rate hikes by the end of the year, suggesting a slightly higher probability of another hike.

　　Most agencies said some of the data rose more than expected, but this may not constitute a long-term driver of inflation, so the Fed policy outlook is almost unchanged from before the report.

　　Gang Hu, managing partner at Winshore Capital Partners, said: "The inflation theme is still there. The key these days is oil."

　　Michael Pound, global head of inflation research at Barclays, said: "The upside surprise in core inflation was largely driven by air fares, which are unlikely to change perceptions of the inflation path. Short-term TIPS offer the best value for upside inflation risk relative to conventional Treasury bonds."