Treasury yields push higher after stronger-than-expected U.S. retail sales


Treasury yields rose in early Friday trade following data showing a sharp increase in U.S. retail sales in September, ameliorating concerns that consumer spending would break down if further government support did not arrive.

What are Treasurys doing?

The 10-year Treasury note yield
TMUBMUSD10Y,
0.749%
fell 0.8 basis point to 0.726%, while the 2-year note rate
TMUBMUSD02Y,
0.133%
edged 0.4 basis point down to 0.137%. The 30-year bond yield
TMUBMUSD30Y,
1.541%
ticked 0.2 basis point down to 1.507%. Bond prices move inversely to yields.

What’s driving Treasurys?

Treasurys came under pressure after U.S. retail sales jumped 1.9% in September, above the MarketWatch-polled consensus of a 1.2% increase.

The elevated spending comes amid worries the U.S. economic recovery will fall apart if further government fiscal stimulus is not forthcoming before the start of next year.

Investors will tackle other U.S. data on Friday, including September industrial production, and October consumer sentiment.

European debt markets rallied as traders saw record new coronavirus cases reported in Europe. Comments from U.K. Prime Minister Boris Johnson that the country needed to prepare for a no-deal Brexit also sparked buying in haven assets.

The 10-year German government bond yield
TMBMKDE-10Y,
-0.616%
fell 1.6 basis points to negative 0.628%.

What did market participants’ say?

“U.S. market rates have resisted the pressure to move significantly lower in the past few days. Most of this pressure has come from the worsening European Covid narrative, which has correlated with another lurch lower in Eurozone market rates,” said Antoine Bouvet, a senior rates strategist at ING, in a note.

“The spread between U.S. 10-year rates and German ones is at its highest since the crisis caused that spread to collapse; which tells a clear story – the U.S. medium-term recovery story is holding up better than the Eurozone one.” said Bouvet.



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