Looking ahead to US retail sales

Core fixed income has drifted higher this morning, reversing much of yesterday's selloff. Focus is squarely on US data later today with a European session largely devoid of big market moving events.

• Yesterday, the Fed's Waller stated that the Fed probably needs to raise rates by 75bp this meeting, but he could support a larger hike if demand doesn't show signs of slowing. He noted that "We have important data releases on retail sales and housing coming in before the July meeting. If that data come in materially stronger than expected it would make me lean towards a larger hike at the July meeting to the extent it shows demand is not slowing down fast enough to get inflation down." And with those comments, today's retail sales data takes on added importance. We will also see Empire manufacturing and import / export price updates released simultaneously.
• Later in the day we will then see industrial production data as well as Michigan confidence data -the inflation expectations component of the latter of particular interest.
• In addition we will hear from the Fed's Bullard, Bostic and Daly.
• TY1 futures are up 0-6+ today at 118-22+ with 10y UST yields down -3.0bp at 2.932% and 2y yields down -2.0bp at 3.115%.
• Bund futures are up 1.02 today at 153.19 with 10y Bund yields down -6.2bp at 1.112% and Schatz yields down -8.6bp at 0.400%.
• Gilt futures are up 0.35 today at 115.98 with 10y yields down -4.3bp at 2.056% and 2y yields down -7.1bp at 1.865%.