Bond yields continue to move lower with the 10-year U.S. Treasury issue moving from a yield of 3.54% to 3.37%. As yields moved lower, returns for bonds moved higher as the aggregate U.S. bond market returned 1.3% for the week.
Contributing to this positive performance were inflation reports that indicated further moderation with consumer prices and producer prices both continuing their declines from the peak levels seen last year.
After hitting a year-over-year peak of 9.1% in June, consumer prices have now decelerated to a year-over-year increase of 6.5%. The decline for producer prices has been even larger as its recent year-over-year level registered 6.2% compared to its recent peak of 11.7% in March 2022.
Economic releases pertaining to the U.S. consumer were mixed. The University of Michigan’s consumer sentiment index rose to 64.6 in the first two weeks of January.
December’s reading registered 59.7, and the consensus estimate for the period was 60.4. Contributing to the improvement was a reduction in energy prices and improved conditions from the financial markets.
In contrast to this positive news was the report of December retail sales, which showed a decline of 1.1%, the largest monthly decline in 2022.
On the positive side of the economic ledger was a higher-than-expected reading for the NAHB Housing Index, which snapped a streak of 12-consecutive monthly declines.