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Buy Rumor/Sell Fact on Weaker Than Expected Retail Sales?

US TSYS SUMMARY
Rates trade weaker after the bell, off first half lows to near middle of session range. Decent overall volumes for a summer session (TYU1>1.2M), rates moved off lows as equities traded weaker in the second half (tech and autos weighing).
  • Early rates sell off after weaker than estimated Retail Sales (-1.1% vs. -0.3% est) had desks scrambling to come up with viable reasons for the move. Buy the rumor/sell the fact?
  • Though retail sales prior month revised slightly higher (1.6% from 1.3%), unlikely driver given the broad miss on current read. Some desks posited market had anticipated an even greater miss due to effect of Delta-variant.
  • Two-way swap tied flow amid better paying as spds forge directionally wider with Tsy yields. That said, corporate issuance has been lagging this week compared to last week's $40B in first three days. Some pre-auction short setting reported ahead Wed's $27B 20Y bond auction.
  • Strong IP, Cap-U underscored first half weakness: Tsys extend sell-off through early evening levels following stronger than expected Industrial Production (+0.9% vs. 0.5% est; June uprev), Capacity Utilization (76.1% vs. 75.7% est). Latest 10YY 1.2717% high, 30YY 1.9352% high. * Additional flow includes option-tied hedging weighing on 5s-10s, dealer selling 10s-30s.
  • The 2-Yr yield is up 0.2bps at 0.2113%, 5-Yr is up 0.2bps at 0.7635%, 10-Yr is down 0.7bps at 1.2583%, and 30-Yr is down 0.8bps at 1.9189%.
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