Last week was fairly quiet with not a lot of economic data being released. There were a few Treasury auctions that showed decent demand. Two-year Swaps rose 4 BPS, and the 10-year Swap rate closed the week flat. It’s worth nothing that Swap rates are down across the board about 20 BPS since the beginning of May.
The entire move on the front-end of the curve came Friday following the release of the University of Michigan numbers. Inflationary expectations came in higher than expected across the board. Consumer sentiment is particularly important with inflation, and it seems the average consumer has accepted it as a reality. Commentary from the Fed and Fed Governors has been mostly Hawkish, and it seems there is strong potential for no rate cuts in 2024. Things will need to change on the inflation front to justify any cuts.
This week, we’ll get PPI data on Tuesday and CPI figures Wednesday. The market will likely adjust very quickly if inflationary data comes in hotter than expected. This could cause a move of up to 20 BPS. We also get Retail Sales numbers on Wednesday, but CPI will be the most closely watched release.
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