TREASURIES-US yields fall after soft retail sales data


By Chuck Mikolajczak

NEW YORK, Feb 15 (Reuters) - U.S. Treasury yields declined on Thursday, after a reading on consumer spending fell sharply in January, although other data indicated the fight against inflation by the Federal Reserve was far from complete.

The Commerce Department's Census Bureau said retail sales dropped 0.8% last month, well short of the estimate of economists polled by Reuters calling for a dip of 0.1% and on the heels of a strong data over the holiday season.

Other data, however showed initial jobless claims fell 8,000 to a seasonally adjusted 212,000 for the week ended Feb. 10, slightly below the 220,000 estimate. In addition, U.S. import prices increased by the most in nearly two years in January amid rising costs for petroleum and other goods.

The yield on the benchmark U.S. 10-year Treasury note US10YT=RR fell 5 basis points to 4.212% and was on track for a second straight decline following a jump on Tuesday after a hot reading on consumer prices.

"Clearly the retail sales came in somewhat below expectations and fits with our narrative that this is going to be a slower growth environment as we traverse 2024, but one where we still expect that there will be persistent economic growth, meaning that our base case is avoiding a recession in mid-2024," said Bill Northey, senior investment director at U.S. Bank Wealth Management in Billings, Montana.

"As we turned the page into 2024, there was a clear disconnect between what the Fed had communicated at that time and where the market began to price. The reconciliation process is clearly underway now with the market moving back toward Fed expectations."

Markets have pushed back expectations for the timing of the Fed rate cut this year, with an 82.2% chance for a cut of at least 25 basis points (bps) at the central bank's June meeting, according to CME's FedWatch Tool. Expectations for a May cut have dipped to 40.6% from roughly 60% a week ago.

The yield on the 30-year bond US30YT=RR fell 5 basis points to 4.399%.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes US2US10=RR, seen as an indicator of economic expectations, was at a negative 33.19 basis points, slightly lower than the negative 32.28 on Wednesday.

The two-year US2YT=RR U.S. Treasury yield, which typically moves in step with interest rate expectations, fell 4 basis points to 4.538%.

The 10-year TIPS breakeven rate US10YTIP=RR was last at 2.288%, indicating the market sees inflation averaging about 2.3% a year for the next decade.

Monthly change in US retail sales

US unemployment claims

(Reporting by Chuck Mikolajczak)

((; @ChuckMik;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


More Related Articles

Info icon

This data feed is not available at this time.

Sign up for the TradeTalks newsletter to receive your weekly dose of trading news, trends and education. Delivered Wednesdays.