Another reading in the report is not so murky. The Fed’s preferred inflation reading, the Personal Consumption Expenditures (PCE) index, was clearly bad news for bonds and mortgage rates. The overall PCE rose 0.3%, exceeding predictions of 0.2% while the more important core PCE jumped 0.6% when it was expected to rise 0.4%. From the Fed’s perspective, these readings indicate inflation is still on the rise and further aggressive measures (rate hikes) will be needed to get it moving lower. Since inflation erodes the value of a long-term bond’s future fixed interest payments and causes them to be sold at a discount to offset inflation, this part of the report is bad news for rates.