Analysis Reveals Unprecedented Pre-CPI Trading Activity

A new analysis has revealed the extent to which the surge in trading of US Treasuries last month was unusual. The data, which was released just a minute before the release of closely watched inflation data, highlights the extent to which traders were willing to take on risk in the lead up to the release of the data.

According to David Wilcox, director of US economic research at Bloomberg Economics, the trading volume for 10-year Treasury note futures during the 60 seconds before the Dec. 13 release of November’s consumer price index was more than three times greater than in any minute immediately preceding the release of the prior 24 CPI reports. That’s a stretch that goes back to late 2020.

The price movements in those contracts were similarly extreme, more than three times as great as they had been in the corresponding 60 seconds before the last 24 reports. This is likely due to the fact that investors are reacting to the release of new information and trying to price in the new risk.

The volume of trading in the minute before the December release was higher than in any other minute in the quarter hour before any of the earlier reports - a total of 360 minutes.

Wilcox's report concluded that the movements were "extremely unusual." He noted that the findings "do not prove that illicit trading occurred" on Dec. 13, but said they substantiate calls for regulators to take a close look at what happened that day.

In the 60 seconds leading up to the 8:30 a.m. release last month, the March futures contract on 10-year notes traded more than 13,000 times. That's more than 100 times the typical volume for that time period. US stock futures also spiked by more than 1%.

The data showed that prices rose at a surprisingly slow pace, causing stocks and bonds to rally even higher. This raised suspicions that some market participants might have gained access to the data before its public release.

President Joe Biden's press secretary, Karine Jean-Pierre, later rejected the notion that anyone in the White House might have leaked the data, calling the incident "minor market movements."

The White House has not yet commented on whether it still considers the Dec. 13 moves to be minor.

The Securities and Exchange Commission and the Commodity Futures Trading Commission have both declined to comment on whether or not the incident is under investigation.

The Bureau of Labor Statistics (BLS) has said that the handling of the November CPI report was subject to the same strict protocols as for every release of sensitive economic data. The BLS also said it had found “no evidence” its information systems had been compromised.

BLS staff begin compiling the report about a week before its publication. A small circle of government officials also receive advance access to the data, including some staff at the White House Council of Economic Advisers.

The CEA then shares the data with key figures across the White House, Treasury and Federal Reserve, including Treasury Secretary Janet Yellen and Fed Chair Jerome Powell. It also briefs the director of the National Economic Council, Brian Deese, and the president.