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June 14, 2019, 4:34 p.m. EDT

Treasury yields bounce off intraday lows after stronger-than-expected retail sales

The German 10-year government bond yield fell to new all-time lows

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By Sunny Oh

Treasury yields came off session lows on Friday after a strong retail sales number suggested consumers would continue to spend, a source of solace for investors concerned over the U.S. economy’s health.

What’s did Treasurys do?

The 10-year Treasury note yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.70%   was virtually unchanged at 2.093% after coming off an intraday low of 2.058%. The benchmark maturity rose nearly a single basis points for the week.

The 2-year note yield /zigman2/quotes/211347045/realtime BX:TMUBMUSD02Y +0.78%  , sensitive to shifting expectations for interest-rate policy, was also mostly flat at 1.850%, but up 1.6 basis points this week. The 30-year bond yield /zigman2/quotes/211347052/realtime BX:TMUBMUSD30Y +0.58%  fell 1.6 basis points to 2.591%, and was up 2.2 basis points for the week. Debt prices move in the opposite direction of yields.

The German 10-year government bond /zigman2/quotes/211347112/realtime BX:TMBMKDE-10Y -6.06%   yield fell 1.7 basis points to negative 0.26%.

What’s driving Treasurys?

Bond yields rose throughout Friday’s session after retail sales for May rose 0.5%, providing some evidence that consumer spending was still providing the economy with momentum. The May reading for industrial production rose 0.4%, above the 0.2% anticipated by analysts polled by MarketWatch.

But not all the data pointed to a rosy picture for U.S. households, a key pillar of the economic expansion. The University of Michigan’s consumer-sentiment index in June fell to 97.9 from 100 in May. They also reported that consumers anticipated a long-term inflation rate of 2.2%, the lowest in the history of the survey.

Investors said trading was mostly range-bound this week as traders kept their eyes on the upcoming Federal Reserve meeting next week, where it is expected to either cut rates or open the door to a cut in the near-future. The central bank could have a tough communication problem on hand as senior policymakers have insisted they would stick to their patient stance unless economic data deteriorated materially.

What did market participants’ say?

“The question for Powell is how do you walk back expectations for a rate cut, when a lot of people will interpret what he said “about acting as appropriate to extend the expansion” as a sign that the Fed is going to push for a cut. Now he’s got to say, now is not the right time,” Jason Thomas, chief economist for AssetMark, told MarketWatch.

What else is on investors’ radar?

Fears over global economic growth surfaced again overnight after Chinese data showed signs that the second largest economy in the world was under pressure.

Chinese industrial output rose 5% in May, falling short of the 5.5% forecast. Meanwhile, fixed-asset investment outside Chinese rural households climbed 5.6% in the January-May period from a year earlier, lower than the 6.1% increase recorded in the January-April period.

add Add to watchlist BX:TMUBMUSD10Y
BX : Tullet Prebon
+0.01 +0.70%
Volume: 0.00
Oct. 17, 2019 4:12p
add Add to watchlist BX:TMUBMUSD02Y
BX : Tullet Prebon
+0.01 +0.78%
Volume: 0.00
Oct. 17, 2019 4:11p
add Add to watchlist BX:TMUBMUSD30Y
BX : Tullet Prebon
+0.01 +0.58%
Volume: 0.00
Oct. 17, 2019 4:12p
add Add to watchlist BX:TMBMKDE-10Y
BX : Tullet Prebon
-0.02 -6.06%
Volume: 0.00
Oct. 17, 2019 6:02p

Sunny Oh is a MarketWatch fixed-income reporter based in New York.

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