Treasury prices decline following sales report
Treasury prices fell on Thursday after a jump in retail sales last month bolstered a notion that an inflation-wary Federal Reserve might have more leeway to begin raising interest rates.
By Agencies |
NEW YORK: Treasury prices fell on Thursday after a jump in retail sales last month bolstered a notion that an inflation-wary Federal Reserve might have more leeway to begin raising interest rates.
A rebound in stocks from a steep sell-off on Wednesday also led some investors who had flocked to the safety of government debt to do an about-face.
Beyond the Commerce Department's report that May retail sales rose 1 percent, stock market investors appeared cheered by buyout bid for Anheuser-Busch Cos. and a pullback in oil prices.
Andy Richman, fixed income strategist at SunTrust's private wealth management division in Palm Beach, Fla., said the sales report bolsters the notion that the Federal Reserve will be able to boost interest rates and reign in inflation without derailing economic growth.
"They don't have to say 'Well, wait a second. We're really going to put this economy in a recession,'" he said.
If interest rates climb and send Treasury yields higher, the notes bought before the rate hike will have less attractive returns.
The benchmark 10-year note fell 1 1/32 to 97 11/32 and yielded 4.20 percent, up from 4.07 percent late Wednesday.
The 2-year note, which is the most sensitive to rate changes, fell 9/32 to 99 12/32 and yielded 2.95 percent, up from 2.81 percent Wednesday.
The 30-year long bond fell 1 6/32 to 93 19/32 and its yield jumped to 4.78 percent from 4.69 percent late Wednesday.
But as Treasurys resumed the week's decline that was interrupted Wednesday, Richman cautioned against reading too much into a single economic reading.
He contends that risks remain for the economy and said it's not clear when the Fed might begin raising rates. Richman doesn't expect policymakers to increase rates at their next meeting, which is scheduled for the end of the month. He said the central bank could wait for several meetings before setting off on a rate-raising campaign.
Still, the idea circulating Thursday that the economy might be nosing ahead would, if correct, give Fed officials a wider berth for implementing policy decisions.
"Globally there is a focus on inflation now and I think that's where investors are saying this just supports that thought or theory that there's no reason to worry about a lack of growth right now," Richman said.
A rebound in stocks from a steep sell-off on Wednesday also led some investors who had flocked to the safety of government debt to do an about-face.
Beyond the Commerce Department's report that May retail sales rose 1 percent, stock market investors appeared cheered by buyout bid for Anheuser-Busch Cos. and a pullback in oil prices.
Andy Richman, fixed income strategist at SunTrust's private wealth management division in Palm Beach, Fla., said the sales report bolsters the notion that the Federal Reserve will be able to boost interest rates and reign in inflation without derailing economic growth.
"They don't have to say 'Well, wait a second. We're really going to put this economy in a recession,'" he said.
If interest rates climb and send Treasury yields higher, the notes bought before the rate hike will have less attractive returns.
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The benchmark 10-year note fell 1 1/32 to 97 11/32 and yielded 4.20 percent, up from 4.07 percent late Wednesday.
The 2-year note, which is the most sensitive to rate changes, fell 9/32 to 99 12/32 and yielded 2.95 percent, up from 2.81 percent Wednesday.
The 30-year long bond fell 1 6/32 to 93 19/32 and its yield jumped to 4.78 percent from 4.69 percent late Wednesday.
But as Treasurys resumed the week's decline that was interrupted Wednesday, Richman cautioned against reading too much into a single economic reading.
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He contends that risks remain for the economy and said it's not clear when the Fed might begin raising rates. Richman doesn't expect policymakers to increase rates at their next meeting, which is scheduled for the end of the month. He said the central bank could wait for several meetings before setting off on a rate-raising campaign.
Still, the idea circulating Thursday that the economy might be nosing ahead would, if correct, give Fed officials a wider berth for implementing policy decisions.
ADVERTISEMENT
"Globally there is a focus on inflation now and I think that's where investors are saying this just supports that thought or theory that there's no reason to worry about a lack of growth right now," Richman said.
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