Treasury yields inch higher as eurozone retail sales returns to pre-crisis levels


U.S. Treasury yields rose on early Wednesday’s trade after strong economic data from Europe helped to ease demand for government bonds.

What are Treasurys doing?

The 10-year Treasury note yield
TMUBMUSD10Y,
0.537%
rose 2 basis points to 0.531%, while the 2-year note rate
TMUBMUSD02Y,
0.113%
was at 0.115%. The 30-year bond
TMUBMUSD30Y,
1.226%
climbed 2.7 basis points to 1.1218%. Bond prices move inversely to yields.

What’s driving Treasurys?

Retail sales in the eurozone jumped 5.9% in June, returning back to levels last seen before the coronavirus crisis. Analysts said the rebound was driven by pent-up demand and income support schemes, two forces which are set to fade in the coming months.

But the data offered a rare respite from the growing gloom around the global economy.

Struggles in the U.S. Congress to pass another fiscal relief package have weighed on the market’s optimism for a sharp recovery in the rest of the year, following the plunge in economic activity in the second quarter.

The 10-year German government bond yield
TMBMKDE-10Y,
-0.517%
gained 3.1 basis points to trade at a negative 0.522%.

Investors will digest some U.S. data, too Wednesday. Automatic Data Processing Inc. will release its report of July’s private-sector employment later at 8:15 a.m. ET, followed by June international trade deficit numbers at 8:30 a.m. Then, the Institute for Supply Management will release its gauge of last month’s service sector activity at 10 a.m.

What did market participants’ say?

“It is not unimaginable that (Euroopean) retail sales will drop back to levels below the June peak and will then take a while to return. We’re therefore not sure this is a V-shape until we know what happens in the coming months,” said Bert Colijgn, senior economist for the eurozone at ING.



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