MW; Treasurys rise a second day after solid retail sales report
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) -- Treasury prices briefly pared gains but stayed ahead on Tuesday, pushing yields down for a second day and shaking off solid data on retail sales and business inventories.
Yields on 10-year notes (UST10Y 2.69, -0.06, -2.19%) , which move inversely to prices, fell 6 basis points to 2.69%. A basis point is 0.01%.
Yields on 2-year notes (UST2YR 0.52, -0.02, -3.74%) declined 2 basis points to 0.52%.
The Commerce Department said retail sales rose 0.4% in August.
Excluding autos, sales increased 0.6%, more than economists expected. See more on retail sales.
Bonds stayed higher after another report said U.S. business inventories rose 1% in July.
The numbers "were better than expected, but not really enough to drive the economy forward in a big way," said Kevin Giddis, president of fixed-income capital markets at Morgan Keegan. "Yields aren't going up in a meaningful way" as long as the housing market remains weak, jobs aren't plentiful, inflation remains low and the Federal Reserve keeps buying Treasurys.
Treasurys were up before the data as a weak report on economic sentiment out of Germany weighed on investor's hopes that the economic recovery will be sustainable, raising the appeal of the relative safety of U.S. debt.
With 10-year yields up from 2.47% at the end of August, Treasury prices "appear to have sold off a bit too far, a bit too fast," said George Goncalves, a bond strategist at Nomura.
This week, the Federal Reserve is buying up Treasury bonds from the market and the government isn't selling any debt, "which perhaps provides the breathing space Treasurys need to recoup some of last week's sharp losses after long-end duration hit the market," he said.
Also helping bonds, the Japanese yen hit a new 15-year high versus the dollar (USDYEN 82.9400, -0.7500, -0.8960%) after Japanese Prime Minister Naoto Kan held onto his job after Tuesday elections.
A stronger yen correlates well with Treasury buying, said analysts at CRT Capital Group. Read about Japanese yen, dollar.
