BOND REPORT: Treasury Yields Climb After Stronger-than-expected Retail Sales Figure
December 14 2017 - 9:30AM
Dow Jones News
By Sunny Oh
Treasury prices fell, pulling yields higher, on Thursday after
strong retail sales figures highlighted the purchasing power of
U.S. consumers and raised the outlook for near-term inflation and
growth.
What did Treasurys do?
The 10-year Treasury yield rose to 2.373%, from 2.353% on late
Wednesday. The 2-year note yield ticked higher to 1.815%, from
1.786%. The 30-year bond yield was flat at 2.736%.
What's driving markets?
Traders dealt with a raft of solid economic data, adding to the
pipeline of building inflationary pressures. This comes in the wake
of a weak consumer-price index figure on Wednesday that drew
bond-buying. Retail sales for November rose 0.8%
(http://www.marketwatch.com/story/us-retail-sales-jump-08-in-november-as-holiday-season-gets-to-good-start-2017-12-14).
Economists polled by MarketWatch had placed a median forecast of
0.4%. While, import prices in November rose 0.7%, but was flat once
excluding for fuel prices.
Initial weekly jobless claims for the 7-day period ending Dec. 9
rose by 11,000 to 225,000 compared with an expected 235,000.
Business inventories for October will come at 10 a.m. Eastern.
What did strategists say?
"[The retail sales number] should be a net positive for Q4 real
GDP estimates. That said, the Fed hiked yesterday despite the
absence of inflation and the curve flattening trade continues to
find support from that dynamic -- this remains the most
identifiable trend," wrote Ian Lyngen, head of U.S. rates strategy
for BMO Capital Markets, referring to the yield curve, a line
tracing out bond maturities and yields.
A flattening yield curve is often interpreted as the market
raising concerns about an economic slowdown because an inverted
curve is seen as a precursor to a recession.
What else are on investors' radar?
The European Central Bank kept rates unchanged while ECB
President Mario Draghi repeated his customary dovish remarks,
saying an "ample degree" of stimulus was still needed to boost
inflation. Market participants were expecting the central bank to
shift its language from easing to tightening in anticipation of a
conclusive end to its bond purchases in Sept. 2018. Holders of U.S.
government paper watch European interest rates closely as they tend
to move in lockstep, with some saying that low European yields have
kept a lid on Treasury rates.
See: Watch here for ECB hints to the unwinding of QE: Live blog
(http://blogs.marketwatch.com/thetell/2017/12/14/watch-here-for-ecb-hints-to-the-unwinding-of-qe-live-blog/)
What did other assets do?
European bonds took a cue from the U.S. trading action. The
10-year German bond yield rose 2 basis points to 0.334%. The
10-year French bond yield edged higher a basis point to 0.667%.
(END) Dow Jones Newswires
December 14, 2017 09:15 ET (14:15 GMT)
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