Yields Climb on Strong Manufacturing Data

Rates rise ahead of retail sales. Stronger than expected NY manufacturing sparked a ~7bp rise in swap rates today ahead of tomorrow’s retails sales data. Despite the move, most of the swap curve remains ~20bps lower over the past five sessions, largely due to last week’s weaker than expected inflation figures. Meanwhile, the S&P 500 recorded its 30th all-time high this year, now just below 5,500 after a 0.77% gain. The DJIA and NASDAQ rose 0.49% and 0.95%, respectively.

May retail sales expected to advance, but downside risks remain. Tomorrow’s retail sales data is expected to broadly show elevated retail spending. On a headline MoM basis, sales are expected to have grown 0.3% vs. 0.0% in April, and super-core sales (excluding auto and gas) are expected to grow 0.4% vs. a -0.1% decline the prior month. Despite the expectations, Citi economist Andrew Hollenhorst wrote in a note that given slower than expected 1Q24 GDP growth, below-forecast retail sales growth in April and muted consumer sentiment, risks to consumer spending and retail sales “remain balanced to the downside.”

French chaos calms after Le Pen says she will be “respectful” if elected. After French government bond yields spiked in last week’s snap election aftermath, far-right leader Marine Le Pen said there will “simply be cohabitation” if she were to win, showing that she would not seek Macron’s resignation. Le Pen added that she is “respectful of institutions… I do not call for institutional chaos.” Meanwhile, ECB chief economist Phillip Lane said that last week’s market activity was merely a “repricing… it’s not the world of disorderly market dynamics.” Vice President of the ECB, Luis de Guindos, said that price action has been “orderly, not of an extreme impact.”