Bond Market Update

Data Recon

• Total retail sales increased 0.6% month-over-month in August (Briefing.com consensus: 0.3%) following an upwardly revised 0.6% (from 0.5%) in July. Excluding autos, retail sales jumped 0.7% month-over-month (Briefing.com consensus: 0.3%) following an upwardly revised 0.4% increase (from 0.3%) in July.
  • The key takeaway from the report is that it reflects a consumer still spending at a good clip. The retail sales data are not adjusted for price changes. Granted, higher prices accounted for some of the increased sales activity in August, but they didn't account for all of it.
• Import prices increased 0.3% month-over-month in August following a downwardly revised 0.2% (from 0.4%) in July. Excluding fuel, import prices were up 0.4% month-over-month following a revised unchanged (from 0.3%) in July. Export prices rose 0.3% month-over-month following an upwardly revised 0.3% (from 0.1%) in July. Excluding agricultural products, export prices were also up 0.3% following an upwardly revised 0.3% (from 0.1%) in July.
  • The key takeaway from the report, or really, the key focal point, is the 0.4% increase in nonfuel import prices. That increase will continue to stoke concerns about tariff-driven inflation pressures.
• Yield check:
  • 2-yr: unch at 3.53%
  • 3-yr: -1 bp to 3.49%
  • 5-yr: unch at 3.60%
  • 10-yr: +1 bp to 4.04%
  • 30-yr: +1 bp to 4.67%