[MARKET ANALYSIS] Fixed income benchmarks hold steady with markets on high alert for the US CPI print

Global fixed income benchmarks have steadily climbed off earlier lows, with participants on high alert for the US CPI print later. USTs (U/C) reside at the upper end of its 106-04+ to 106-13+ range, with the US CPI on the docket later today. Headline inflation is expected to hold steady at 3.4% Y/Y, with the M/M figure expected to tick higher to 0.4%. For core metrics, Y/Y to drop to 2.4% from 2.5% while M/M to hold at 0.2%. The PPI print on Thursday was mixed, headline Y/Y rate accelerated to 5.4%, above the 5.3% forecast and the prior 4.8%. With the FOMC meeting next Wednesday, policymakers will be putting a lot of emphasis on this data, with the hawks pointing to upside risks to inflation, while Fed's Waller commenting that "if August inflation data comes in hot, he would consider a September rate hike." Bunds (-3 ticks) pare some of Thursday's losses, with the 10yr yield holding around 3.50% in the aftermath of the ECB policy meeting and the surge in energy prices. To recap, the ECB meeting was largely as expected, with nothing to significantly shift market pricing as we await further data and energy developments. Thereafter, ECB source reports suggested that officials expect more tightening this year, with the debate potentially as soon as October.  Gilts (+16 ticks) opened slightly higher, in line with their peers. The UK economy continues to show resilience despite higher energy prices, with July GDP printing at 0.4% (exp. 0%) while the 3-month average also held steady at 0.4% (exp. 0.3%). Manufacturing and industrial production figures were also solid. This set of data is unlikely to change expectations for the BoE rate decision next Thursday.