What is the front end of the curve saying about the path of policy?

The reaction was concentrated where policy expectations live. Flat July producer prices against an expected 0.2% rise pulled the five-year down 6.9 basis points to 4.31%; the ten-year moved 4.0 basis points; the long bond did not follow at all.

That shape matters more than the direction. The front end responding to data while the long end holds near multi-decade highs is a curve pricing an easier near-term path and an unchanged — or worse — term premium. The two ends are answering different questions.

This has been the recurring structure of the summer rather than a one-day event: a benign June CPI took a July hike off the table on 15 July, a soft payroll eased the path again on 8 August, and through it all the long end kept setting multi-decade highs.