Bond Markets Weaker Following Stroner Economic Data
Treasuries put in their most boring, uneventful overnight session of the week. 10yr yields held a 2bp range all night with no detectable drama and began the domestic session perfectly unchanged, as did MBS.
The first half hour was similarly quiet and is only moderately interesting since the 8:30am data. Both Jobless Claims and Retail Sales came in stronger than expectations, but we're not seeing a runaway sell-off (knock on wood).
- 315k vs 330 forecast, 324k previously
- 2.855 mln continued claims vs 2.90 forecast
- Our take on share of market movement: 5/10. Conventional wisdom would hold that Retail Sales would be the bigger market mover, but Jobless Claims is more interesting than usual due to its nearness to the 'modal' low of the past year at 323k. Obviously it broke below that today and that will be an important line in the sand next week.
- +.3 vs +.2 forecast, -.6 previously (revised lower from -0.4)
- Excluding Autos +0.3 vs +0.2 forecast
- Excluding Autos/Gas/Building Supplies +0.3 vs +0.3 forecast, -0.6 previously (revised lower from -0.3)
- Our take on share of market movement: 3/10. This was essentially an "on target" report for the current month and overall a net-negative report once revisions are considered. About the only harm it does to bond markets is that it solidifies the argument that we're moving past the apex of the weather-related data disruptions. That said, it likely wouldn't create as much weakness as we're seeing without help from Jobless Claims. Maybe none at all.
You might notice 2 missing points from our little "share of market movement" scale above. Those go to the tradeflow considerations mentioned in the Day Ahead. Without those, this data would likely be having a bigger impact (pushing bonds even weaker). As it stands though, MBS are down only 2 ticks and 10yr yields are only 1.5bps higher at 2.74.
As an aside, Import/Export Prices also reported at 8:30am. Both came in much higher than expected because the expectations failed to adequately account for the effects of rising fuel prices. Hindsight's 20/20, but it lessens any inflationary implications in a data set that doesn't really move markets in the first place.