Yield Curve Flattens Post-Retail Sales

Rates mixed following retail sales figures. The short end of the yield curve climbed slightly today despite lower-than-expected retail sales in February and a downward revision in January. The short end rose ~4 bps in the immediate aftermath of the data, and yields were nearly unchanged throughout the remainder of the session, closing 2-3 bps higher on the day. The long end declined 1-3 bps, and the spread between 2-year and 10-year yields flattened to 25 bps. Meanwhile, equities generally rallied today, with the S&P 500, NASDAQ, and DJIA up 0.31%-0.85%.

Mixed retail sales data helps ease recession concerns. According to data released today, retail sales grew in February, reversing January’s results that showed a decline across all measurements. While headline sales grew just 0.2% vs. expectations of a 0.6% advance, the print was 1.4% higher than the 1.2% contraction observed in January, and retail sales grew at or above expectations across other measurements. Especially encouraging was a 1% advance in control group sales, which feeds directly into GDP, vs. February’s 1% drop. The figures were viewed as a sign that consumers are still spending, albeit cautiously, which may point to mild economic slowdown instead of a more severe recession.

Treasury Secretary Bessent says he is “not at all” worried about the US economy. Scott Bessent appeared on NBC this weekend and reiterated that the recent flight to quality is merely a market correction. He expanded and said, “I’m not worried about the markets. Over the long term, if we put good tax policy in place, deregulation and energy security, the markets will do great…” He also argued that tariffs will either establish “fair” world trade or generate substantial revenues if trade barriers do not come down. Similarly to President Trump, Bessent would not rule out a near-term recession, where a pullback in government spending could lead to an economic slowdown.