Bond Markets Weaker After Retail Sales
- June Retail Sales +0.2 vs +0.6 forecast
- May revised to +0.5 from +0.3
- Excluding Autos +0.4 vs +0.5 forecast, May revised to +0.4 from +0.1
- Excluding Autos/Building Materials/Gas, +0.6 vs +0.5 forecast, May revised to +0.2 from 0.0
Empire State Manufacturing
- 25.60 vs 17.0 forecast, 19.28 last month
- Employment Index 17.05 vs 10.75 previously
- Import Prices +0.1 vs +0.3 forecast
- Export Prices -0.4 vs +0.2 forecast
At face value the 0.2 vs 0.6 miss in Retail Sales should be a strong positive for bond markets, yet MBS and Treasuries are now moving into slightly weaker territory.
The counterpoints to the stronger Retail Sales headlines lie in the reports internals. First off, the components (that stuff that "excludes" other stuff like autos or gas or building supplies or all three) was stronger than expected. Additionally, May's numbers were revised higher across the board--in some cases significantly.
With the Empire State Manufacturing index also coming in stronger than expected, there's a strong enough case against bond markets for now, but markets may avoid getting too carried away before the 10am Yellen testimony.
Fannie 3.5s are currently down 4 ticks at 102-02 and 10yr yields are up a bp at 2.556.