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Tsys Gain After Soft Retail Sales, 20Y Bond Reopen Stops Through

US TSYS
  • Two-part rally Tuesday as Treasuries gap higher after lower Retail Sales data and strong 20Y Bond auction reopen. Fed-speak push-back limited.
  • Advance MoM (0.1% vs. 0.3% est, prior down revised to -0.2% from 0.0%), Ex Auto MoM (-0.1% vs. 0.2% est, prior down-revised to -0.1% from 0.2%), Ex Auto and Gas (0.1% vs. 0.4% est, prior revised to -0.3% from -0.1%). Retail Sales Control Group (0.4% vs. 0.5% est, prior revised to -0.5% from -0.3%).
  • As the revisions imply, these figures are volatile and subject to reassessment in the months ahead, but control group retail sales in May remained a little under the March level, with ex-auto/gas struggling to move above December 2023 levels.
  • Treasuries pared gains briefly as some Fed speakers pushed back on dovish expectations (Boston Fed Collins: "shouldn't overreact to a month or two of good inflation data"; StL Fed Musalem "could be 'quarters' before the first rate cut").
  • Treasury futures extended highs (TYU4 110-28.5) after $13B 20Y bond auction reopen (912810UB2) stopped 2.1bp through: 4.452% high yield vs. 4.473% WI; 2.74x bid-to-cover vs. prior month's 2.51x (lowest since February). Indirect take-up at 77.89% vs. 70.76% last month; direct bidder take-up 16.35% vs. 19.81% prior; primary dealer take-up at 5.77% vs. 10.06% prior.
  • Projected rate cut pricing regaining momentum (but still off Friday highs). Post-Retail Sales vs. pre-data: July'24 steady at -8% w/ cumulative at -2bp at 5.307%, Sep'24 cumulative -18.1bp (-16.1bp), Nov'24 cumulative -27.8bp (-25.3bp), Dec'24 -48.3bp (-44.5bp).
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