Updated on January 15, 2021 10:04:25 AM EST
December’s Retail Sales report kicked off this morning’s batch of economic data, showing a 0.7% decline in consumer level sales last month. This was a larger decline than the 0.2% that was forecasted, signaling weakness in consumer spending. Even a secondary reading that excludes more volatile and costly auto transactions gave us results that are bond friendly (down 1.4% vs forecasts of down 0.2%). These readings are very good news for bonds because consumer spending makes up over two-thirds of the U.S. economy. With sales declining fairly rapidly, the economic recovery will take longer to accomplish. And since bonds tend to thrive in weaker economic conditions, this is good news for mortgage rates also.