Ten-Year Yield Tumbles To Four-Month Closing Low

(RTTNews) - After ending the previous session moderately lower, treasuries showed a substantial move back to the upside during trading on Wednesday.

Bond prices moved sharply higher early in the session and remained firmly positive throughout the day. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, plunged by 16 basis points to 3.375 percent.

The ten-year yield more than offset the uptick seen on Tuesday, ending the session at its lowest closing level in four months.

The rally by treasuries came following the release of a slew of U.S. economic data, including a Commerce Department report showing a steep drop in U.S. retail sales in the month of December.

The Commerce Department said retail sales tumbled by 1.1 percent in December after slumping by a revised 1.0 percent in November.

Economists had expected retail sales to decrease by 0.8 percent compared to the 0.6 percent drop originally reported for the previous month.

Andrew Hunter, Senior US Economist at Capital Economics, said the steep drop in retail sales "adds to the evidence from the surveys that the economy was rapidly losing momentum towards the end of last year."

"Although GDP growth still looks to have held up over the fourth quarter as a whole, we continue to expect the economy to fall into recession in the first half of this year," Hunter added.

A separate report released by the Federal Reserve showing industrial production in the U.S. decreased by much more than expected in the month of December.

The Fed said industrial production slid by 0.7 percent in December after falling by a revised 0.6 percent in November. Economists had expected industrial production to edge down by 0.1 percent compared to the 0.2 percent dip originally reported for the previous month.

Meanwhile, the Labor Department released a report showing U.S. producer prices fell by more than expected in the month of December.

The Labor Department said its producer price index for final demand declined by 0.5 percent in December after inching up by a revised 0.2 percent in November.

Economists had expected producer prices to edge down by 0.1 percent compared to the 0.3 percent increase originally reported for the previous month.

The report also showed the annual rate of producer price growth slowed to 6.2 percent in December from 7.3 percent in November. The year-over-year growth was expected to slow to 6.8 percent.

Trading on Thursday may be impacted by reaction to another batch of U.S. economic data, including reports on weekly jobless claims, housing starts and Philadelphia-area manufacturing activity.