Baker Market Update 2026-08-14

Happy Baker Market Update Friday! The first two trading days of the week were relatively calm and uneventful on the economic data front.

On Tuesday, $58 billion of 3-year notes cleared at a high yield of 4.29%, a notable increase from the prior auction's high yield of 4.18%. However, in the face of rising yields and event risk from the CPI report scheduled for release the following day, the bid to cover firmed from 2.60 to 2.71.

On Wednesday, we received arguably the most watched inflation measure, the Consumer Price Index (CPI). Both headline and core figures came in line with consensus expectations across the board. The headline figure rose 0.1% in the month of July and is up 3.4% from a year ago. Core CPI, which excludes volatile components such as food and energy, rose 0.2% and 2.5% on a monthly and yearly basis, respectively. Energy prices fell 1.5% for a second consecutive monthly decline as prices at the pump fell 2.9%. There is still much work to be done, as energy prices remain up 14.7% over the past year, with the war in Iran continuing to act as a headwind to returning inflation closer to the Fed's 2% long run target.

Yesterday brought the weekly read on initial jobless claims, which showed 209,000 Americans filing for unemployment benefits for the first time during the week ending August 8. That came in above both the prior week's revised figure of 200,000 and analyst expectations of 202,000. Also on the docket was inflation on the producer front, gauged by the Producer Price Index (PPI). PPI final demand was unchanged on a month over month (MoM) basis and rose 4.7% from a year ago, with the monthly figure landing 0.2% below consensus expectations of a 0.2% gain.

For most of this week, economic data came in relatively close to consensus, with the inflation prints in particular offering little in the way of surprises. This morning, however, retail sales brought an unexpected twist, coming in far below both forecasts and the previous value. On a MoM basis, retail sales fell sharply by 0.6% against expectations of a 0.1% gain and June's 0.2% increase, the steepest monthly decline since May 2025. Nonstore retailers and automobile dealerships saw the biggest declines in the month of July, falling 2.2% and 1.8%, respectively.

Next week brings a slate of data on the current state of the economy, with US Manufacturing PMI, Industrial Production, and Housing Starts on the docket. Have a great weekend everyone!