In the 60 seconds before the CPI hit, heavy trading drove Mystery higher

(Bloomberg) — Karen Jean-Pierre, press secretary to President Joe Biden, was quick to brush off the question when it came at the end of her daily press conference on Tuesday. No, she said, there was no chance that anyone in the White House would have leaked the November inflation report before it was released at 8:30 a.m. There was a lot of fuss, she saw, about what were just “minor moves in the market.”

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But there was nothing minor about the rise, which settled in the seconds before a better-than-expected inflation number hit the Labor Department’s website.

Stock futures suddenly rose more than 1%. Trading in Treasury futures rose, sending record yields down about 4 basis points. These are major movements in such a short period of time – larger than the full session’s swings on some days. And longtime market watchers say they should come under scrutiny from regulators, even if the leak is just one of several possible explanations for why traders suddenly started buying right before the report was published.

“Significant trading activity prior to market-changing news is suspicious and usually merits regulators making the appropriate inquiries,” said Jerome Silvers, Head of Regulatory Enforcement and Litigation at Bachmann Stein Walder Heiden. “This is unusual, especially given the decline in inflation that was reported, which was much greater than what markets had expected,” he said. “It is possible that someone will look into it, innocent or not.”

Of course, if and when such an investigation will happen remains to be seen. For its part, the US Bureau of Labor Statistics said it was not aware of any early release of its data.

However, more than 60 seconds before the data came out, more than 13,000 10-year futures contracts traded in March (during a period when activity is usually non-existent) as contract bids were raised. Stocks and bonds rallied higher immediately after the data was released, as investors speculated that slowing inflation meant the Federal Reserve would halt its tightening cycle early next year.

CME data released on Wednesday showed that open interest — or the amount of new risk that traders hold — rose across all Treasury futures contracts, meaning buying activity in and around Tuesday’s inflation data was driven by new long positions rather than covering existing ones. Shorts.

BLS spokesman Cody Parkinson said by email that while the agency is not aware of any early release, some government officials routinely receive the data before it is released under federal guidelines.

Read more: Big buys in Treasury futures seen moments before CPI release

Excluding food and energy, the CPI rose 0.2% in November and was up 6% from a year earlier. The median estimate in a Bloomberg survey of economists called for a monthly increase of 0.3%.

–Help from Reade Pickert.

(Adds details about open interest showing jump in long positions in Treasuries in seventh paragraph)

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