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U.S. Treasury yields clipped their decline on Friday after the start of a raft of economic, with retail sales coming in slightly weaker than expected but suggesting the engine of the U.S. economy — consumers — continued to spend amid the uncertainty sparked by the COVID-19 pandemic.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 0.702% fell 0.7 basis point to 0.707%, after touching a low of 0.69% earlier in the day. The benchmark maturity closed at an eight-week high on Thursday.
The 2-year note rate TMUBMUSD02Y, 0.153% edged 0.8 basis point down to 0.157%, while the 30-year bond yield TMUBMUSD30Y, 1.421% stood pat at 1.426%. Bond prices move inversely to yields.
What’s driving Treasurys?
The bond market showed signs of stabilizing after a weeklong selloff as traders looked to accommodate the larger debt auctions, increased by the Treasury Department last week.
Another round of stronger-than-expected economic numbers added to the signs that the U.S. recovery continued to make steady progress, as data showed a boost in consumer and wholesale prices in July.
Retail sales in July rose 1.2%, and increased by 1.9% once stripping out for auto and gas sales which can unduly influence the data. Second-quarter productivity jumped 7.3%, while second-quarter unit labor costs surged by 12.2%.
Separately, a reading on industrial production rose 3% in July for the third straight monthly gain after sharp declines in March and April, the Federal Reserve reported Friday.
The gain in July was above Wall Street expectations of a 2.7% gain, according to a survey by MarketWatch. Production in June was raised to a 5.7% gain from the earlier estimate of a 5.4% increase.
What did market participants’ say?
“While the rise in [consumer] prices is raising some hopes of a slow but steady rebound in the US economy, the reality is that the Fed’s ultra-easy policy, asset purchases and government stimulus measures to date have been central to supporting gains,” said analysts at Rabobank, in a Friday note.
