Last Friday saw the release of the US CPI report. It rose a paltry 0.1% mom, with yoy growth dropping to a meager 1.7%. The bond market saw this as a go ahead to rally as yields fell across the board with the US 5yr Treasury falling 8 basis points on the week. Rationale is that the FED is now going to have to consider the fact that inflation is not gaining traction and that further hawkish balance sheet talk and rate hikes, may have to move to the back burner. As our readers know, the FED really can't raise rates or reduce much of anything, thus their tactics of hawkish rhetoric, which is nothing more than wasted air is there only weapon. Adding to this already slippery slope for the FED is the fact that in the 4th quarter the US Treasury is going to issue around $500 billion worth of debt, which is basically the total amount of debt issued in the previous prior three quarters combined! So would it make sense to raise rates with benign inflation and the massive influx of debt coming down the pipe line? We think not, but once again, we know that raising rates is a bank subsidy, but even so, the conditions on a fundamental economic basis certainly do not warrant a hawkish campaign.