Strong sales but credit crumbling
August 16, 2023
–Retail Sales much stronger than expected at 0.7% and 1.0% ex-auto and gas (m/m). 10yr yield made new high, just eclipsing last October’s high close at 4.245, spiking to 4.268 post-data, but came back and marked at 4.219 at futures settlement time. Once again, near SOFR one-year calendars edge to new highs. SFRZ3/Z4 settled -116 (9460.5/9576.5) and H4/H5 settled -119.5 (9479.0/9598.5). The March spread is now the most inverted on the curve. It’s not that odds of a near-term change in FF are rising, (FFX3 remains in its 9457/9460 range), but perceptions of forward eases have been slightly pared back. Additionally, it feels as if there’s an element of forced selling weighing down longer maturities.
–Retail sales strong, Atlanta Fed GDP Now was raised to a sizzling estimate of 5% for Q3, however two tweets from Kobeissi Letter note deteriorating debt dynamics: “the % of credit card debt more than 30 days past due is up for six straight quarters” [from a very low base] And…”In the first 7 months of ’23 the US has seen an alarming 402 corporate bankruptcies. This is more than the entire 2022 total of 373.”
–Housing Starts and Industrial Production this morning followed by FOMC minutes in the afternoon. SPX made a new recent low yesterday afternoon -1.16%. China’s stocks remain under pressure
