MW: Treasurys pare gains after retail sales report
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices briefly pared gains Friday, though yields reversed some of the prior day’s steep rise, after a report showed U.S. retail sales rose 0.5% in July.
Yields on 10-year notes 10_YEAR -2.86% which move inversely to prices, fell 4 basis points to 2.31% from 2.29% before the data and thirty-year bond yields 30_YEAR -1.05% declined 6 basis points to 3.74%.
Two-year yields 2_YEAR -0.51% , more or less pegged by monetary-policymakers this week, were little changed at 0.2%.
The increase in retail sales was in line with analysts’ expectations, but some noted the data was compiled before the debt-ceiling debate in Washington sent stocks and confidence plummeting. Read story on retail sales.
“It’s not so much July data that concerns us as the impact of the equity plunge on August data and beyond,” said bond strategists at CRT Capital Group.
That puts an upcoming report on consumer sentiment in August in the spotlight, the said.
Moreover, bond traders are grappling with the high volatility in the past few days that sent benchmark 10-year yields back to the record low set in December 2008 in the heart of the financial crisis. Read about bonds reversing their rally.
Also this week, the Federal Reserve said it’s likely to keep its key overnight interest rate low until mid 2013. The rates are at a record-low range of zero to 0.25%. The announcement sent 2-year yields plunging to record lows, even below the top of the Fed’s range.
Bond investors are also skittish about sovereign debt and banks in Europe, with some of the euro zone’s largest members now getting beaten up in financial markets.
Before the U.S. report, “lingering concerns about European banks and sovereigns has helped restore the bid for Treasurys,” said bond strategists at RBS Securities.
