- U.S. retail sales rose 5.3% in January over the prior month
- The 10-year U.S. Treasury bond yield climbed to 1.34%, its highest level in nearly a year
- The average 30-year fixed mortgage loan rate rose to 2.81%, the highest level since November
Top Three Market Headlines
Retail Sales Soar in January: Sales at retail establishments surged in January, according to the U.S. Department of Commerce. Data showed that sales at online retailers, restaurants, and brick-and-mortar stores increased 5.3% in January from the prior month. Following three months of decline, January’s gain was the strongest monthly increase since June of 2020. Additional government stimulus payments and eased Covid-19 related restrictions on businesses helped drive the strong spending growth rate. As consumers continue to spend money on items related to their homes, the strongest retail sales gains in January came from home improvement and work-from-home products such as furniture and electronics.
U.S. Treasury Yields Climb: Yields on longer-dated U.S. Treasury bonds last week hit their highest levels since February of 2020. The 10-year Treasury yield ended the week at 1.34%, up nearly half a percentage point since the start of the year. Meanwhile, the 30-year U.S. Treasury yield closed at 2.13%, versus 1.65% at year-end. These moves have produced the steepest yield curve in nearly four years, with the spread between 10-year and 2-year yields widening to nearly a full percentage point. Rising expectations that relaxed COVID-19 restrictions and additional fiscal stimulus will spur accelerated rates of economic growth and inflation have keyed the recent rise in rates.
Mortgage Rates Rise with U.S. Treasury Yields: With Treasury bond rates rising, mortgage rates have also begun to climb from recent lows. The average rate for a 30-year fixed loan reached 2.81% last Thursday, according to Freddie Mac, up from 2.67% at the start of the year and the highest level in three months. Mortgage rates have remained below 3% since July of last year, providing a strong boost to the housing market, though a continued upward trend in rates may begin to dent affordability and purchase activity.