Retail Sales Improve Across the Board. Rates Move Higher

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Retail Sales data has hit screens. It was much better than expected. Rates no likely.

February, Retail Sales rose 0.3% vs. an expected decline of 0.2%vs. a revised for the worse +0.1% print in January (from +0.5%) . Excluding autos, sales rose 0.8%, crushing forecasts for a 0.1% improvement.  Looking deeper into the data, percentage gains were led by the electronics/appliances category as well as food and beverage buying (snow storm help that out?). Miscellaneous store sales were up 2.5% too. Year over year, retail sales are up 3.9%. Remember how bad things were at this time last year....

Looking at the data in terms of actual dollars spent.   Excluding autos...retail sales improved in every category except health care. Food and beverage and general merchandise sales were notably large, also note the increase in food and beverage services...those are bars and restaurants. I wonder how much the Super Bowl and the Olympics played into that rise in outlays?

 

Even after downward revisions to Jan. data, which basically puts the two month retail sales print at -0.1% (-0.4% revision + 0.3% Feb gain = -0.1% over last two months. Much closer to forecasted) this report is still indicative of an uptick in consumer demand, which is fueling further positive progress in stocks, at the expense of bonds.

Dow futures are +40 at 10,650. S&P futures are now +5.00 at 1151.

The 3.625% coupon bearing 10 year TSY note is -0-10 at 98-27 yielding 3.765%...extending overnight weakness after Retail Sales hit. (only 1 bp higher though)

 

The FN 4.5 moved lower initially but bounced back quickly. The most "rate sheet influential" MBS coupon is -0-07 at 100-21 yielding 4.428%. The secondary market current coupon is 4.43%. The CC yield is +61.1bps/UST10YR and +56.4/10yrIRS. Yield spreads have tightened into the down trade (normal). 

NEXT EVENT: This rates sell off/stock rally needs confirmation from the data above. UoMichigan Consumer Sentiment at 955 am. Business Inventories at 10am. Stocks are looking for more reason to rally on, the 10 yr note is fighting originator unfriendly flows, heading into the 3.71 to 3.85 range.