Treasuries See Further Downside Following Latest Economic Data

Treasuries moved to the downside during trading on Tuesday, extending the pullback seen over the two previous sessions.

Bond prices slid into negative territory in morning trading and remained firmly in the red throughout the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 4.1 basis points to 3.549 percent.

Treasuries came under pressure following the release of the Commerce Department’s report on retail sales in the month of April.

While the report showed retail sales increased by less than expected, the sales growth still helped ease concerns about an impending recession, reducing the safe-haven appeal of bonds.

The Commerce Department said retail sales rose by 0.4 percent in April after falling by a revised 0.7 percent in March.

Economists had expected retail sales to climb by 0.7 percent compared to the 1.0 percent slump originally reported for the previous month.

Excluding an increase in sales by motor vehicle and parts dealers, retail sales still rose by 0.4 percent in April after sliding by 0.5 percent in March. The rebound in ex-auto sales matched economist estimates.

“The April retail sales report shows consumers remain inclined to spend though they are becoming more selective in their purchases,” said Oren Klachkin, Lead US Economist at Oxford Economics. “A stronger-than-expected handoff to Q2 indicates the main engine of GDP growth continues to hum.”

Treasuries saw further downside after a separate report from the Federal Reserve showed industrial production climbed by 0.5 percent in April. Revised data showed production was unchanged in each of the two previous months.

Economists had expected industrial production to come in unchanged compared to the 0.4 percent increase originally reported for the previous month.

The National Association of Home Builders also released a report unexpectedly showing a continued improvement in homebuilder confidence in the month of May.

News out of the latest round of debt ceiling negotiations may impact trading on Wednesday, while traders are also likely to keep an eye on a report on new residential construction.

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