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US CPI for August rose 0.4%m/m vs 0.3% expected and y/y to 2.9% (from 2.7%), core CPI +0.3%m/m, ~3.1%y/y, driven by shelter and transport costs. UST10Y yield dropped to ~4.022% after the release, down ~5-6bp intraday, while UST2Y saw a smaller decline to around ~3.54%, yielding a 10-2 spread near 48-55bp depending on session highs. UST30Y also eased, trading down ~2.4-bp to mid-4.6%s as long-dated yields retreat. The inflation surprise reinforced expectations for a 25bp Fed cut next week; however soft labor indicators and rising jobless claims tempered fears of overheating.