Bear Flattening, Strong USD and Central Banks push back on Excessive Rate Cut pricing

Sharp moves overnight as US Economic data continued to show resilience. US Retail Sales rose 0.60% mom and Retail Sales ex Auto rose 0.40% mom. The Atlanta FED GDPNOW estimate was revised higher to 2.40% from 2.20% earlier. The final estimate for Q4 growth will be made on Jan 19 and the advance US GDP for Q4 will be released on Jan 25. Elsewhere, Hawkish commentary dominated EZ speeches with CBs pushing back excessive rate cuts into 2024, higher UK headline and Core Inflation print plus the disappointing data from China, GDP grew by 5.2% in 2023 and the country’s population fell by 2m.

Post the stronger than exp Retail Sales number following hawkish comments from Christopher Waller, the rates market further paired bets on the rate cuts in 2024. The implied pricing suggests a cumulative rate cut of 143 bps from previous lows of 166 bps seen post the CPI release. US2s10s bear flattened and the USD index spiked higher to 103.69.

Yields	High	Low	Close	DoD ▲
US 2Y	4.38	4.21	4.37	14.10
US10Y	4.13	4.04	4.11	4.40
US2s10s	-0.16	-0.26	-0.26	-9.70
US30Y	4.34	4.27	4.32	1.80
JGB 10Y	0.63	0.60	0.61	1.80
DE10Y	0.29	0.22	2.29	3.90