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Treasury yields edged up for a third session Tuesday morning after data showed U.S. May retail sales recovered by more than expected, and in the wake a report that the White House was contemplating a $1 trillion infrastructure spending plan to add to fiscal stimulus already approved by Congress. .
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 0.778% rose 4.9 basis points to 0.751%, while the 2-year note rate TMUBMUSD02Y, 0.205% was up 1.2 basis points to 0.201%. The 30-year bond yield TMUBMUSD30Y, 1.558% climbed 7.2 basis points to 1.521%.
What’s driving Treasurys?
Sales at U.S. retailers rose 17.7% in May, compared with a forecast 8.5% increase and a revised 14.7% fall in April. Yet even after the rebound in May, sales were still 6% lower compared to the same month in 2019.
Earlier, Bloomberg reported that the Trump administration is preparing a nearly $1 trillion infrastructure plan.
Not only will infrastructure spending lift economic growth and inflation expectations, a bugaboo of bond investors, but it could also increase the amount of new long-dated government bond issuance, said analysts.
Risk assets also received a boost after the Federal Reserve said Monday it would start buying corporate bonds from the market for the first time as part of its plans to buy a broad basket of corporate bonds based on an index of it’s own creation.
Some senior Fed officials are on the docket. Fed Chairman Jerome Powell will give testimony in front of the Senate at 10 a.m. ET. Fed Vice Chairman Richard Clarida will speak later in the day.
In other U.S. data, May industrial production numbers are due at 9:15 a.m., and June homebuilders’ index and April business inventories will come out at 10 a.m.
Read: This ‘sticking point’ is holding back the Fed from hoovering up corporate debt
What did market participants’ say?
“When, as now, economic and corporate data is so dire, then it is up to central banks to step in to bridge the gap in economic activity. Equity rallies are a side effect, and not the chief object, of these central bank moves, but the mantra ‘do not fight the Fed’ is still as powerful as it ever was,” said Chris Beauchamp, chief market analyst at IG, in a note.
