Shorter-maturity Treasurys staged a pretty meaningful rally into the weekend following a lackluster read on US manufacturing activity and a non-trivial downward revision to the University of Michigan headline.

Between them, the ISM miss and sentiment revision suggested a loss of momentum for the otherwise unyielding economy. To be completely honest, I planned on skipping the final read on Michigan sentiment. Typically, the revision’s a non-event. Not so much this time around.

The figure below (which Bloomberg also highlighted Friday, not because either of us is especially original, but rather because it’s the natural chart to make under these particular circumstances) shows the deviation between the preliminary Michigan sentiment headline and the final print.

The point, obviously, is to suggest that consumer moods deteriorated rapidly late last month. More rapidly, in fact, than during any other survey period since March of 2020, a month which began with a lot of sneezing and sniffling and ended in the closest thing humanity’s seen to the zombie apocalypse since the Spanish flu.

The color that accompanied the actual release belied the apparently grim mood. Either that, or the media (which in this case includes me, although I certainly wouldn’t describe myself as “media”) is overplaying the situation. I’m fully prepared to accept the latter explanation.

“For all but one index component, readings [in February] were higher than all values between mid-2021 and the end of 2023,” survey director Joanne Hsu said. “Consumers perceived few changes in the state of the economy since the start of the new year, and they appear to be assured that inflation will continue on a favorable trajectory.”

I don’t know if they (consumers) should be so “assured” about that (inflation continuing along a “favorable trajectory,” I mean). The last CPI report begged to differ. Or maybe it didn’t. Maybe the uptick was all a methodological quirk. You’ll have to ask the BLS. Or a “super user.”

Whatever the case, the sentiment miss underscored the message from ISM. As noted, the rates read-through was a bull steepener. You know, the bull steepener that stalled this year. The one we’ve been waiting on for what seems like a short lifetime.

The front-end rally got a little extra juice from Chris Waller, who said Friday he’d “like to see a shift in [the Fed’s] Treasury holdings toward a larger share of shorter-dated securities.” He was talking about bills, but twos benefited from the remark, which came at the tail-end of a speech on QT.

How much any of the above matters depends entirely on who you are:

• “Serious” market participants waiting on the steepener and anxious for signs that legacy drag from the most aggressive rate-hiking campaign since the Fed was chaired by an NBA small forward (I’ve used that joke before, but it’s a good one) took note of the incrementally dovish data and the reaction at the front-end.
• “Casual” market observers (laypeople, if you like) probably dismissed the Michigan sentiment revision as noise if they noticed it at all, and likely viewed ISM as just another small piece of a puzzle so large and complicated that investors are better off not endeavoring to comprehend it.

I’ll leave it to readers to decide who among those two investor types is more deserving of the “serious” characterization.