Retail Sales Beat Can’t Dim Treasury Rally

  • Treasury yields are trading mostly around unchanged this morning and stock futures indicated slightly lower as the market digests some economic releases. Despite the unchanged nature of today’s early trading the 10yr Treasury is retaining the rally from last Thursday’s post-CPI reaction. The 10yr is yielding 3.76%, near the 3.75% low from yesterday while the 2yr is currently yielding 4.37%, not far from the 4.29% low from last Thursday’s post-CPI rally.

 

  • October Retail Sales were better than expected and that put Treasuries on the back foot initially, but prices have rebounded a bit which speaks to the underlying bid in Treasuries right now. Top line retail sales rose 1.3% for the month vs. 1.0% expected and better than the unchanged reading in September. Sales ex autos and gas were up 0.9% vs. 0.2% expected and 0.6% in September, which was revised higher from 0.3%. The Control Group, which is a direct feed into GDP, rose 0.7% vs. 0.3% expected and 0.6% in September, which was revised higher from 0.4%.

 

  • The retail sales numbers are not inflation-adjusted so some price increases are influencing numbers, but still allowing for that the report is quite impressive and will probably give some boost to the 75bps rate-hiking club.

 

  • Import and export price changes were released this morning and while both were lower MoM, they missed expectations slightly. Import prices fell -0.2% in October vs. -0.4% expected and -1.1% in September. YoY import prices rose 4.2% vs. 4.1% expected and 6.0% in September. Export prices fell -0.3% matching expectations and -1.5% in September. YoY export prices rose 6.9% vs. 7.1% expected and 9.2% in September. In all, the softening in import and export prices continues, but not quite at the pace of prior months.

 

  • If you missed our webinar yesterday, “Preparing your Balance Sheet for 2023” you can find a recording of it here. It’s a 50-minute presentation on the economy, asset liability issues, and product recommendations. We hope you find it useful.


 

Agency Indications — FNMA / FHLMC Callable Rates

Maturity (yrs) 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year
0.25 5.16 5.01 4.97 4.98 5.11 5.57
0.50 5.14 4.98 4.91 4.87 4.97 5.46
1.00 5.14 4.95 4.87 4.83 4.88 5.33
2.00 4.93 4.82 4.75 4.76 NA
3.00 4.70 4.70 NA
4.00 4.65 NA
5.00 4.61 NA
10.00 NA

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Published: 11/16/22 Author: Thomas R. Fitzgerald