Bond Market Update

Data Recon

• Retail sales increased 0.4% month-over-month in December (Briefing.com consensus 0.5%) following an upwardly revised 0.8% increase (from 0.7%) in November. Excluding autos, retail sales also increased 0.4% month-over-month (Briefing.com consensus 0.5%) following an unrevised 0.2% increase in November.
  • The key takeaway from the report is that retail sales, which are not adjusted for price changes, were more subdued than expected in December, suggesting consumers spent in a more considerate manner. Importantly, though, they remained inclined to spend.
• Initial jobless claims for the week ending January 11 increased by 14,000 to 217,000 (Briefing.com consensus 212,000). Continuing jobless claims for the week ending January 4 decreased by 18,000 to 1.859 million.
  • The key takeaway from the report is that there was nothing disruptive about it in terms of the market's understanding that the labor market, overall, continues to be in pretty good shape.
• The January Philadelphia Fed Index soared to 44.3 (Briefing.com consensus -6.0) from an upwardly revised -10.9 (from -16.4) in December. The dividing line between expansion and contraction is 0.0.
  • The key takeaway from the report is that there was a marked increase in nearly every index component, including new orders (to 42.9 from -3.6) and prices paid (to 31.9 from 26.6), that is indicative of improved demand.
• December import prices were up 0.1% month-over-month and up 2.2% year-over-year. Export prices were up 0.3% month-over-month and up 1.8% year-over-year.
  • The key takeaway from the report is that import and export prices are tracking in a more subdued manner that is helping to ease some of the market's inflation angst.
• Yield Check:
  • 2-yr: +2 bps to 4.28%
  • 3-yr: +2 bps to 4.38%
  • 5-yr: +2 bps to 4.47%
  • 10-yr: +1 bp to 4.67%
  • 30-yr: +1 bp to 4.89%