How will this week’s consumption indicators impact debt securities? (Part 8 of 8)
What is MARTS?
Advance retail sales estimates for February will be released on Thursday, March 13, by the U.S. Census Bureau.
The Advance Monthly Retail Trade and Food Services Survey (or MARTS), conducted by the U.S. Census Bureau, provides an initial estimate of monthly sales by type of business for retail and food service firms nationwide, based on a questionnaire mailed to about 5,000 firms across the country, representing over 3 million retail and food service firms. Analysts estimate that responding firms represent ~65% of the MARTS’ retail sales in dollar volume terms.
What did January’s report reveal?
Seasonally adjusted advance estimates of U.S. retail and food services sales for January 2014 came in at $427.8 billion—a 0.4% decline month-on-month, but an increase of 2.6% above January 2013. Total sales for the quarter ended January 2014 were up 3.4% from the same period a year ago. Non-store retail sales in January 2014 increased 6.5% year-on-year, while auto and other motor vehicle dealers were up 4.1% over 2013.
How does the retail service report impact fixed income markets?
Retail sales are an important gauge of consumer confidence. Since consumption makes up about two-thirds of the economy, retail sales estimates give us a heads-up of where the economy is heading. Growing retail sales would signify an economic expansion, and other factors remaining constant, this would imply the Fed would stop its policy of monetary stimulus, leading to higher interest rates and lower bond prices. The reverse would hold true for a retail sales decline. A general macro-level increase in retail sales may also benefit large retailers like Wal-Mart (WMT) and Target (TGT). However, a general increase in interest rates is likely to adversely affect bond prices and ETFs like BND, TLT, and HYG.
To learn more about investing in fixed income ETFs, see the Market Realist series Why high yield bond issuance reveals a horizontal market.
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