- US Retail Sales data came out stronger than expected: US Retail Sales Control Group (0.7% actual vs 0.4% consensus expectation) and US Retail Sales Ex Auto and Gas (0.6% actual vs 0.2% expected).
- Initial Jobless Claims came out lower than expected (242k actual vs 251k expected), reversing the surprise from last week.
- Fed speakers such as Lorie Logan were hawkish. She said that a pause in June isn’t likely given price pressures remaining strong. Fed Chair Jerome Powell, however, said no decision has been made yet for June.
- From a previous expectation of three interest rate cuts starting July, markets are now pricing in just one to two 25-bp cuts by year-end 2023, but only a 15% chance of a hike in June.
- US debt ceiling negotiations were described as “productive” but a deal remains elusive.
Market Movements
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As of May 30, 2023
What to watch out for next?
What happened in the past week since May 16?
Strong US economic data and growing optimism on a resolution to the US debt ceiling standoff improved risk sentiment and dialed back expectations on interest rate cuts this year. US Fed speakers were mostly hawkish as well, with some opening up the possibility of raising rates further if needed. As a result, US Treasury yields rose by 22-33 basis points (bps).
Meanwhile, credit spreads closed the week 6-7 bps tighter due to the positive risk sentiment, with bottom fishers also taking advantage of higher rates.
What to watch out for next?
What to watch out for next?
What happened in the past week since May 16?
Strong US economic data and growing optimism on a resolution to the US debt ceiling standoff improved risk sentiment and dialed back expectations on interest rate cuts this year. US Fed speakers were mostly hawkish as well, with some opening up the possibility of raising rates further if needed. As a result, US Treasury yields rose by 22-33 basis points (bps).
Meanwhile, credit spreads closed the week 6-7 bps tighter due to the positive risk sentiment, with bottom fishers also taking advantage of higher rates.
- US Retail Sales data came out stronger than expected: US Retail Sales Control Group (0.7% actual vs 0.4% consensus expectation) and US Retail Sales Ex Auto and Gas (0.6% actual vs 0.2% expected).
- Initial Jobless Claims came out lower than expected (242k actual vs 251k expected), reversing the surprise from last week.
- Fed speakers such as Lorie Logan were hawkish. She said that a pause in June isn’t likely given price pressures remaining strong. Fed Chair Jerome Powell, however, said no decision has been made yet for June.
- From a previous expectation of three interest rate cuts starting July, markets are now pricing in just one to two 25-bp cuts by year-end 2023, but only a 15% chance of a hike in June.
- US debt ceiling negotiations were described as “productive” but a deal remains elusive.
What to watch out for next?
What to watch out for next?
The Federal Open Market Committee (FOMC) meeting minutes to be released Wednesday, May 24, will be in focus. But Friday (May 26) will be a heavy day of data with Durable Goods Orders and PCE Core Deflator (the Fed’s preferred inflation gauge) to be released. We will also monitor the final print of the University of Michigan inflation expectations for April, which was the catalyst for the sell-off last week.
What to watch out for next?
Outlook
The size of the move higher in US Treasury yields last week was surprising, but we still think that economic data will deteriorate eventually, and cause US yields to fall and spreads to widen. As such, we think that current levels present a good opportunity to accumulate stable credits (see latest strategy update) with high coupons to help generate gains during this volatile period. Primary issuances will still be the best source of benefits from more attractive premiums.
What to watch out for next?
