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The TXPR Price Index set a new 52-week high of 709.80 today, beating the old mark of 709.21 set yesterday (which I didn’t report. Sorry about that!)

So Kevin Warsh has been confirmed as Fed Governor:

Warsh was confirmed in a 54-45 vote, mostly split along party lines, with only Democratic Sen. John Fetterman of Pennsylvania crossing the aisle to vote in favor of Warsh’s nomination. It was the most partisan vote for a Fed chair nominee in history, underscoring the unease among Democrats with Trump’s fight against the Fed, though Republicans broadly welcome Warsh’s leadership.

Warsh is widely viewed as more aligned with President Donald Trump, who has long demanded rate cuts, but he is set to take office as inflation pressures intensify due to the US-Israeli war with Iran. Inflation jumped to a three-year high in April, according to the latest Consumer Price Index, and now outpaces wage growth.
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The incoming Fed chief has proposed or hinted at reducing the size of the Fed’s $6.7 trillion balance sheet; coordinating more closely with the Treasury Department on the balance sheet; cutting back on the number of policy meetings each year from eight to as little as four; hosting fewer news conferences; shrinking the size of the Fed’s Washington-based workforce; and not providing frequent hints on the path of interest rates. According to JPMorgan analysts, all those changes would be within the remit of Warsh’s power as chair.

It was announced yesterday that US CPI jumped:

Prices rose 0.6% on a monthly basis, driving the annual rate to 3.8%, the highest since May 2023, according to the latest Consumer Price Index data released Tuesday by the Bureau of Labor Statistics.

Economists had expected prices to rise 0.6% from March and for the annual rate to climb to 3.7%.

Prior to the late-February US-Israeli strikes on Iran, inflation had eased to 2.4%. It leaped higher in March, and now, the energy price shock from the Iran war is further compounding longstanding affordability concerns for Americans weighed down by years of fast-rising prices.
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Paychecks grew 3.6% from April of last year, on average; prices rose 3.8%.
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Wealth inequality has widened in recent years. Lower- and middle-income households are experiencing increased strain and having a harder time keeping up and managing debt.

Separate data released Tuesday by the Federal Reserve Bank of New York showed increased rates of consumers becoming seriously delinquent on their loans, particularly their student loans.

… and today it was the PPI’s time to roar:

PPI, a measure of wholesale inflation, increased in April to 6% on an annual basis from 4% in March, well exceeding economists’ expectations. On a monthly basis, the index increased 1.4%, according to data released Wednesday by the Bureau of Labor Statistics. That’s twice the pace that economists expected. It’s also the second-largest monthly gain dating back to the index’s inception in 2010.

A 15.6% increase in gas prices accounted for 40% of the increase in prices businesses paid last month. That only looks to be getting worse with oil prices yet to reach their peak levels and global inventories falling at a record pace, according to a report released Wednesday by the International Energy Agency.

But the picture is still ugly for businesses even when excluding the volatile categories of food and energy. That measure, known as core PPI, rose 1% for the month, pushing the annual rate to 5.2%.

PerpetualDiscounts now yield 5.66%, equivalent to 7.36% interest at the standard conversion factor of 1.3x. Long corporates yielded 5.06% on 2026-05-13. Therefore the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has remained at the 230bp reported May 6.

The TXPR price index set a new 52-week high today of 708.07, eclipsing the old mark of 706.20 set on May 8. Canada five-year yields jumped 7bp to 3.19%.

Jobs, jobs, jobs!:

Job creation remained solid in April, as businesses shrugged off uncertainty brought on by the war in Iran and higher gas prices.

Employers added 115,000 jobs last month, surpassing expectations. The unemployment rate remained at 4.3 percent.

The jobs tally was taken in mid-April, as employers were still evaluating the impact of the war in Iran. If higher gas prices persist and consumers pull back more broadly to compensate, economists anticipate that could dampen job creation and lift the unemployment rate.

April was the second consecutive month of strong job growth, suggesting that the labor market could be breaking out of its monthslong low-hire, low-fire stasis. The March numbers were revised up modestly, to 185,000.
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• Narrow growth: The labor market has become increasingly dependent on health care, which has powered job creation for months. The sector and related professions in social assistance added nearly 54,000 jobs last month, a substantial portion of total job growth. Other industries also added jobs, including transportation and warehousing, retail trade and leisure and hospitality.
• Hints of A.I?: Economists have been closely watching the information and professional and business services sectors for evidence that artificial intelligence is beginning to affect jobs. Although the technology has not yet led to widespread job losses, the April jobs report could stoke concerns. The information sector, which includes tech companies, lost 13,000 jobs last month, and finance slashed 11,000 jobs. Both sectors have announced high-profile layoffs recently.

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Consumer sentiment in early May fell to its lowest level on record, according to the University of Michigan’s long-running survey. Consumers felt slightly more optimistic about the outlook over the next year, but more pessimistic about the current state of the economy and their own finances. Gas prices, which are now above $4.50 a gallon nationally, are continuing to weigh on household finances — about a third of survey respondents spontaneously mentioned high gas prices, and nearly as many brought up tariffs. Still, in encouraging news for Fed policymakers, consumers’ inflation expectations eased slightly, suggesting Americans haven’t yet lost faith in the central bank’s ability to keep a lid on price increases.

The TXPR price index set a new 52-week high today of 706.20, just barely ahead of the old mark of 706.17 set May 6. ZPR also set a new 52-week high. The Five-Year Canada yield was down 6bp to 3.12%.

The New York Fed released the updated survey of Consumer Expectations:

April Survey: Short-Term Inflation Expectations Rise at Short-Term, Remain Stable at Medium- and Longer-Term Horizons

• Median inflation expectations increased by 0.2 percentage point (ppt) to 3.6 percent at the one-year-ahead horizon and were unchanged at 3.1 percent and 3.0 percent at the three-year and five-year-ahead horizons, respectively, in April.
• Median year-ahead gas price growth expectations dropped sharply by 4.3 ppts to 5.1 percent from a spike in March.
• Median one-year-ahead earnings growth expectations increased by 0.3 ppt to 2.7 percent in April; however, mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—increased by 0.4 ppt to 43.9 percent, the highest reading of the series since April 2025.
• Perceptions about credit access compared to a year ago and expectations for future credit availability both deteriorated, while the average perceived probability of missing a minimum debt payment over the next three months decreased by 0.9 ppt to 11.4 percent, the lowest reading in more than two years.

On the other hand, the 10-Year TIPS/Nominals Break-Even Inflation Rate hit a three-year high:

[New York Fed President John] Williams in his Tuesday speech said inflation expectations remain “well anchored, despite the deluge of shocks.” Key surveys from the University of Michigan, the New York Fed and the Conference Board show that to be the case. Kashkari, one of the dissenters at last month’s Fed meeting, agreed in a statement on Friday, writing he’s “somewhat comforted by the fact that both market and survey measures of long-run inflation expectations appeared well anchored at our 2 percent target.”

But just on Tuesday, a market-based measure of long-term inflation expectations climbed to a three-year high. The 10-year inflation breakeven rate, which is the difference between the 10-year Treasury yield and the 10-year Treasury Inflation-Protected Security yield, reached 2.5%, the highest level since early 2023.

“The longer inflation remains above 2%, the greater the risk that it becomes entrenched in expectations, making it harder to achieve the (Fed’s) goal,” Fed Vice Chair Philip Jefferson warned in March, shortly after the Iran war broke out.

The TXPR price index set a new 52-week high today of 706.17, beating the old mark of 704.76 set yesterday. ZPR also set a new 52-week high.

PerpetualDiscounts now yield 5.68%, equivalent to 7.38% interest at the standard conversion factor of 1.3x. Long corporates yielded 5.06% on 2026-05-06. Therefore the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) has narrowed to 230bp from the 240bp reported April 29.