Another Set of Strong Data

Strong data pushes rates higher. Swap rates and Treasury yields rose across the curve today, a reversal of the bond rally seen over the past few sessions. Hot data, including consumer confidence and durable goods orders, were the catalysts. 2-year UST yields rose just 1bp to 4.76%, with the larger yield gains seen in the belly of the curve. The 10-year UST yield climbed 4bps to 3.76%.

Today’s strong economic data raises questions about the immediacy of a US recession. A slew of data releases today showed strength in several corners of the US economy. Durable goods orders exceeded estimates, consumer confidence hit the highest level since early-2022, and US housing prices rose for a third consecutive month. Stephen Stanley, chief US economist at Santander, said today, “the consensus view continues to stubbornly call for a recession starting in a few months, but the economic data are telling [a] far different story right now.” The data releases don’t fully reject the possibility of a recession, but viewed in tandem with recent consumer spending, retail sales and job market data which all generally signaled strength, a downturn may be farther around the corner than some anticipate. The data may also provide Chair Powell with the arguments he needs to justify further Fed hiking and impact his tone tomorrow at a meeting in Europe with other central bankers.

Day ahead. Chair Powell will make public comments at 9:30 AM. Wholesale and retail inventories (8:30 AM) will be followed by the release of bank stress test results at 4:30 PM.