Treasury yields lower as markets brace for retail sales data

• December retail sales expected to rise 0.4% month-over-month, down from 0.6% in November, according to Reuters poll of economists
• January nonfarm payrolls report rescheduled for Wednesday after being delayed by partial government shutdown, with January CPI data due Friday showing forecast annual inflation cooling to 2.5%
• Markets tracking reports that Chinese authorities advised banks to reduce U.S. Treasury exposure due to concentration risk and volatility concerns

Summary

Market Movement:

U.S. Treasury yields declined on Tuesday, with the benchmark 10-year Treasury yield falling over 1 basis point to 4.184%. The 30-year yield dropped to 4.836%, while the 2-year note yield decreased less than 1 basis point to 3.475%.

Key Economic Data:

Investors are bracing for December retail sales data, expected to show a 0.4% month-over-month increase, down from November's 0.6% gain, according to Reuters-polled economists.

Upcoming Releases:

Markets face a packed data calendar following delays from the partial U.S. government shutdown:

• January nonfarm payrolls report: Rescheduled for Wednesday (postponed from Friday)
• January consumer price index (CPI): Due Friday, with forecasts indicating annual inflation cooling to 2.5%
• Weekly initial jobless claims: Thursday

International Development:

Treasury markets are monitoring reports from Bloomberg News that Chinese authorities have encouraged domestic banks to reduce exposure to U.S. Treasurys due to concerns about concentration risk and market volatility.

Market Context:

The data releases this week are critical for investors assessing the strength of the U.S. economy and future Federal Reserve policy direction. The anticipated cooling in inflation to 2.5% would represent progress toward the Fed's 2% target, potentially influencing monetary policy decisions. The softer retail sales forecast suggests consumer spending may be moderating, while the delayed jobs report will provide crucial labor market insights.