US 10 year yields, inflationist pressure and demand expectations

US 10 year yields, inflationist pressure and demand expectations
US 10 year yields, inflationist pressure and demand expectations

We have obtained a few data that will form the basis for the movement of over 1.3% of the 10 year bon yields, we have watched for a while. Retail sales increased much higher than expected due to the spending power provided by the intermediate financial package of 910 billion USD in January. In January, retail sales increased by 5.3% compared to the previous month, well above the expectations of 1.1%. This growth rate points to an increase of 6.1% when fuel and automobiles are excluded (core data is more important in terms of reducing the price effect).   If we look at the sub items; Naturally, there is a very high increase of 22.1% in online sales out of store compared to January 2020. It is a situation that we will consider as the new normal after the pandemic. If we look at other important changes compared to last year; Spending on sports, hobbies, music or books shows an increase of 22%, that people who were locked in their homes in quarantine naturally turned to hobbies and entertainment. Building materials increased 13.7%, food 11.6%, motor vehicles and parts 10.4% and furniture and household goods 9.4%.   PPI data should also be touched upon, as it shows the inflationary pressures in the last period. In the headline, monthly and annual expectations are 0.4% and 0.9%, while the realizations are 1.3% and 1.7%, respectively. In our CPI evaluation last week, we mentioned that the inflationary pressure comes from the increase in costs. Price pressure in oil and commodities is the main reason for this, but the main factor that will accelerate this inflation pressure will be household demand. Demand developments are heavily dependent on the fiscal package effect. In an effective financial package, a rapid rise in inflation in the near term may be inevitable, and it should be noted that the main factor that recently increased inflation expectations and bond yields is due to this expectation of economic heating.   In this environment, Fed minutes to be announced in the evening will be followed. Tapering is not an issue under consideration at this stage, at least the bank will not go this way anytime soon. However, as the economic heating effects are at the stage of being seen especially in inflation, the frequency and intensity of this being expressed by the members at each meeting will increase. A stronger-than-expected recovery could put the Fed and Powell in an even more pressing point when it comes to tapering. At this stage, there is a slower Fed expectation than the 2013 model Fed, and some indicators can be instantaneous and misleading. The Fed will want to see continuity in the first place and make sure the recovery is permanent.   Kaynak Tera Yatırım

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