ATFX - US Treasury yields are approaching 2008 highs! "Terror data" may be hit

atfx- Although tonight's "horror data" once again exceeded expectations, strategists say that as U.S. Treasury yields approach their 2008 highs, U.S. retail sales will decline...

According to macro strategist Simon White,The recent rise in long-term Treasury yields will push up mortgage rates, which, combined with already tightened consumer credit, will further squeeze consumptionIn addition, consumer discretionary and retail stocks with longer durations may underperform

According to White,The outlook for yield-sensitive consumption is darkening as 10-year Treasury yields approach their highest levels since July 2008.Higher yields lead to higher mortgage rates. This is not a fait accompli, as it also depends on mortgage spreads, but the correlation between yields and spreads has become less negative, so it is reasonable to expect that higher yields will lead to higher mortgage rates.

As shown in the figure below,This suggests that retail sales will further weaken.

Beijing time on Tuesday evening, the United States released retail sales data for July rose more than expected, which is the fourth consecutive month of growth.White had expected July's data to improve slightly from June, but he believes the growth trend is likely to decline, as depicted in the chart above.

White also said,Another headwind for consumption is the credit crunchAfter the collapse of Silicon Valley Bank, credit did not look as tight as expected, but the truth is that credit has begun to be squeezedHe said, "We can see,Compared to last year, banks are much less willing to issue consumer loans"This suggests that retail sales will further decline."

This outlook is clearly bad for retail stocks.Retail stocks have been the fourth-best performing US sector so far this year, behind automotive, semiconductors and media. In addition, the retail sector has a longer duration and is therefore more vulnerable to rising interest rates.

However, White said that protecting such positions is also relatively inexpensive, with the XRT (Retail ETF) having the highest put positions in the global industry classification standard secondary industry.