Treasuries Move Moderately Higher On Retail Sales Data

(RTTNews) - Treasuries moved moderately higher over the course of the trading day on Wednesday, benefiting from easing concerns about the outlook for interest rates.

Bond prices moved steadily higher for much of the session before pulling back off their highs going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.9 basis points to 2.413 percent.

With the drop on the day, the ten-year yield offset the gains seen in the two previous sessions to hit a new one-year closing low.

The strength among treasuries came following the release of a report from the Commerce Department showing that U.S. retail sales unexpectedly came in unchanged in the month of July.

The Commerce Department said retail sales were virtually unchanged in July after edging up by 0.2 percent in June. Economists had been expecting another 0.2 percent increase.

Core retail sales, which exclude autos, gasoline, and building materials, inched up by just 0.1 percent in July following a downwardly revised 0.5 percent increase in June.

The data suggests that spending in the third quarter got off to a slow start, offsetting some of the recent concerns about the outlook for interest rates.

Allan von Mehren, Chief Analyst at Danske Bank, said, "After some swings in retail sales related to the weak winter sales and rebound in Q2, sales are reverting to the trend seen over the past years."

"The deceleration in growth also suggests that we should expect a moderation in ISM indices for both manufacturing and non-manufacturing over the coming 3-4 months," he added. "This may ease the pressure a little bit on the Fed."

Treasuries saw further upside after the results of the Treasury Department's auction of $24 billion worth of ten-year notes showed that the sale attracted above average demand.

The ten-year note auction drew a high yield of 2.439 percent and a bid-to-cover ratio of 2.83, while the ten previous ten-year note auctions had an average bid-to-cover ratio of 2.69.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

Finishing off this week's series of long-term securities auctions, the Treasury is due to sell $16 billion worth of thirty-year bonds on Thursday.

Trading on Thursday could also be impacted by the release of a pair of reports on weekly jobless claims and import and export prices.