Yields on the Move Again

10-year Treasury yields moved over 1.25% in the early morning hours without any particular reason. After taking down supply last week in a fairly easy manner, some consolidating around the upper teen range was seen as likely but the move this morning has to be respected. Technically speaking, 1.27% holds some support to watch but after that there is little in the way of additional support until 1.43%-1.47%. The usual list of suspects can be trotted out for the move higher: high inflation breakeven rates, oil prices moving higher, and getting to work on Stimulus 3.0. With the impeachment trial over, the Senate will take full aim at the Biden Administration’s proposed $1.9 trillion rescue package, but not before taking a week to rest in recess. The result of the trial should, if anything, embolden Democrats to go it alone and not cut the size of the package in hopes of garnering a few Republican votes. While some tweaking may be necessary to keep all 50 Democratic senators on board, it appears they will be able to do that and pass the measure via budget reconciliation.  January retail sales will be the biggest economic release (Wednesday), with sales expected to pop after a disappointing prior two months. Finally, FOMC minutes are also due Wednesday with eyes trained on any talk of tapering in the future.


Treasury Curve Today Week Change
3 Month 0.04% +0.02%
6 Month 0.05% +0.01%
1 Year 0.06% Unch
2 Year 0.12% +0.02%
3 Year 0.21% +0.03%
5 Year 0.52% +0.04%
10 Year 1.26% +0.08%
30 Year 2.07% +0.08%

Short-Term Rates

Fed Funds 0.25%
Prime Rate 3.25%
3 Mo LIBOR 0.19%
6 Mo LIBOR 0.20%
12 Mo LIBOR 0.30%
Swap Rates  
3 Year 0.293%
5 Year 0.604%
10 Year 1.262%

Economic Calendar

Date Statistic For Briefing Forecast Market Expects Prior
Feb 16 Empire Manufacturing Feb 6.2 12.1 actual 3.5
Feb 17 PPI (MoM) Jan 0.4% 0.4% 0.3%
Feb 17 PPI (YoY) Jan 0.8% 0.9% 0.8%
Feb 17 Advance Retail Sales (MoM) Jan 1.0% 1.1% -0.7%
Feb 17 Retail Sales Control Group (MoM) Jan 0.9% 1.0% -1.9%
Feb 17 Industrial Production (MoM) Jan 0.4% 0.5% 1.6%
Feb 17 FOMC Meeting Minutes Jan 27 NA NA NA
Feb 18 Housing Starts (MoM) Jan -0.7% -0.6% 5.8%
Feb 19 Existing Home Sales (MoM) Jan -3.0% -2.4% 0.7%


Top 5 Events for the Week

Feb 16—19, 2021

  1. Biden Stimulus 3.0 Outlook —All Week
  2. January Retail Sales —Wednesday
  3. FOMC Meeting Minutes—Wednesday
  4. January Housing Starts & Permits—Thursday
  5. January Existing Home Sales—Friday
  1. Biden Stimulus 3.0 Outlook—All Week

With the impeachment trial over, the Senate can now take full aim at the Biden Administration’s proposed $1.9 trillion Stimulus 3.0 package but not before taking this week to rest in recess. But  when they get back to work the result of the trial should only embolden Democrats to go it alone and not cut the size of the package in hopes of garnering some Republican votes. While some tweaking may be necessary to keep all 50 Democratic senators on board, it appears they will be able to do that and pass the measure via the reconciliation route.  While the House passed a bill with an increase in the minimum wage to $15/hour it will fall to the Parliamentarian of the Senate to determine if that piece can fit in the reconciliation procedure or it will need to be passed with a filibuster-proof majority. If so, it will be stripped out and handled separately. It seems the other contentious piece, stimulus checks and possibly lowering the income phase-out levels, has been settled with those phase-outs remaining unchanged from the first round of checks.

  1. January Retail Sales—Wednesday

Perhaps second to the monthly jobs reports the Advance Retail Sales Report is a first-tier indicator of the health of the consumer and hence the economy. After a disappointing last couple months of sales as consumers battled a surge in virus cases and renewed lockdowns in some areas, January is expected to be better. Sales are expected to be up 1.1% versus –0.7% in December. Sales ex-auto and gas are also expected to be up 0.8% versus the disappointing –2.1% drop in December. The retail sales control group—a direct feed into GDP—is expected to be up 1.0% versus a disappointing –1.9% drop in December.  Thus, if  expectations are met, a nice pop in headline and control group numbers will ease some concerns after two straight months of struggling sales. As virus case counts continue to recede, and vaccinations spread, retail sales should only build on the foothold that January is expected to provide.

  1. FOMC Minutes From January Meeting —Wednesday

On Wednesday we’ll get the FOMC minutes from the January 27 meeting. While nothing earth-shattering came from the meeting the minutes will still be scoured for any signs the Fed may have left about future tightening of conditions. The statement and Powell’s press conference went to pains to say the Fed was not even thinking about thinking about tapering QE purchases so the minutes will be viewed to confirm that stance.

  1. January Housing Starts & Permits—Thursday

It’s no secret the housing market is one sector of the economy that has kept up the momentum from the early months of the recovery, but a bit of a pause is expected for January.  Starts are expected to decrease -0.6% to 1.660 million units annualized versus December’s lofty 5.8% gain, or 1.669 million units annualized, the highest since September 2006. Permits are expected to decrease  -1.5% to 1.679 million annualized versus 1.704 million in December.  So a solid read is expected for January, but some plateauing is forecast after December’s better-than-expected activity.  As an example of the strength in housing,  activity in  permits is the highest it’s been since August 2006.

  1. January Existing Home Sales—Friday

On Friday we’ll get January existing home sales—accounting for 90% of the residential market—which are expected to be down slightly from December. The January print is expected to  shrink  –2.4% month-over-month to 6.60 million houses from 6.76 sold in December, on an annualized basis. The housing sector continues to benefit from record low mortgage rates and the January numbers, while expected to be slightly down from December,  should continue to reflect a housing market hitting on all cylinders.  The 6.60 million annualized figure expected in January compares closely to November 2005 when sales peaked at 7.25 million during the housing bubble.

Yield Universe


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Published: 02/16/21 Author: Thomas R. Fitzgerald