Daily Market Color

Happy Spending Day, U.S.A.

Rates rise despite weak data. Swap rates and Treasury yields rose across the curve today despite an ISM manufacturing level of 46.0, the weakest level in 3+ years. The 2-year yield rose 4bps to 4.94% and the 10-year yield climbed 2bps to 3.86%. The move saw the 2s10s UST inversion climb to its widest level in over 40 years, now at -108bps.

Independence Day inflation. 4th of July celebrations this year will tie the knot on two quarters of strong US economic growth and persistent, but possibly declining inflation. A recent survey from the National Retail Federation (NRF) reported that 87% of Americans plan to celebrate, the highest number since before the pandemic, which means a variety of industries will benefit from increased spending activity this weekend. Consumer discretionary sectors will benefit from increased sales on items such as grills, outdoor furniture and patriotic items. Travel spending will also spike; according to the American Automobile Association, ~51 million Americans will have traveled 50 miles or more from home during the holiday weekend. Unfortunately, inflation doesn’t take a vacation. Americans are expected to eat 150 million hot dogs tomorrow, and the price will be ~1.1% higher than last year around this time. During the same period, the price of condiments, spices, seasonings and sauces rose 9.5% and the price of ground beef rose 0.6%. Given higher prices, the NRF expects total spending this weekend to reach ~$9.5 billion, up 23% from 2022 and 40% from 2019. Regardless of how far you plan to travel, what you plan to throw on the grill, or how many fireworks you’ll launch into the night sky, the team at Derivative Path wishes you a happy Independence Day!  

Day ahead. Markets will be closed tomorrow in observance of Independence Day. Enjoy the holiday!

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