Futures Little Changed After Yesterday’s Post-Retail Sales Bear-Flattening

TYH4 is trading at 111-13+, flat from NY closing levels after trading down to 111-09 yesterday, just above initial technical support at 111-06+ (Low Jan 05).

• This comes after US tsys bear-flattened, with yields 2-14bps higher, following stronger than expected US Retail Sales in December (0.55% m/m vs. cons 0.4% after a marginally upward revised 0.35% m/m vs. initial 0.28%). The control group, which feeds into GDP, was the clear standout, jumping 0.76% m/m (cons 0.2%) after a slightly upward revised 0.47% (initial 0.40%).
• A flurry of additional data kept US tsys anchored: Import/Export index came out higher (0.0% vs. -0.5% est) / lower (-0.9% vs. -0.7% est) respectively. Industrial production fared slightly better than expected in December, rising 0.05% m/m (cons -0.1%) but the beat was offset by a downward revised 0.0% m/m (initial 0.2%) in November.
• Overall, the data dampened rate cut projections for the first half of 2024: March 2024 chance of rate cut falls to -57.2% w/ cumulative of -14.9bp at 5.180%, May 2024 no longer pricing in 25bp cut -- currently at -85.6% w/ cumulative -36.3bp at 4.966%. June 2024 still pricing in a 25bp cut, cumulative -61.5bp at 4.714%.
• A poor 20-year auction added to the weakening in US tsys.