Bond Market Update

Data Recon

• Retail sales declined 0.9% month-over-month in January (Briefing.com consensus 0.0%) following an upwardly revised 0.7% increase (from 0.4%) in December. Excluding autos, retail sales declined 0.4% month-over-month (Briefing.com consensus 0.3%) following an upwardly revised 0.7% increase (from 0.4%) in December.
  • The key takeaway from the report is that there was a notable pullback in spending on goods, something that can be attributed in part to abnormal weather. The full picture, however, points to a tired consumer after the holidays, raising the question as to whether that fatigue will persist because of inflation pressures or prove to be short-lived.
• Import prices rose 0.3% month-over-month in January and were up 1.9% year-over-year, versus down 1.3% for the 12 months ending January 2024. Excluding fuel, import prices were up 0.1% and were up 1.8% year-over-year, versus down 0.3% for the 12 months ending January 2024. Export prices increased 1.3% month-over-month in January and were up 2.7% year-over-year, versus down 2.4% for the 12 months ending January 2024. Excluding agricultural products, export prices jumped 1.5% month-over-month and were up 2.9% year-over-year, versus down 1.5% for the 12 months ending January 2024.
  • The key takeaway from the report is the recognition that there was inflation, as opposed to disinflation, across the report.
• Total industrial production increased 0.5% month-over-month in January (Briefing.com consensus 0.3%) following an upwardly revised 1.0% increase (from 0.9%) in December. The capacity utilization rate jumped to 77.8% (Briefing.com consensus 77.7%) from a downwardly revised 77.5% (from 77.6%) in December. Total industrial production increased 2.0% yr/yr while the capacity utilization rate was 1.8 percentage points below its long-run average.
  • The key takeaway from the report is that the jump industrial production in January was rooted entirely in the volatile component of utilities output, which surged as cold temperatures boosted the demand for heating.
• Yield check:
  • 2-yr: -5 bps to 4.26%
  • 3-yr: -6 bps to 4.27%
  • 5-yr: -7 bps to 4.32%
  • 10-yr: -6 bps to 4.47%
  • 30-yr: -4 bps to 4.69%