U.S. Government Bonds Fade After North Korea Backs Off Threats

By Akane Otani Features Dow Jones Newswires

U.S. government bonds retreated Tuesday as cooling tensions between North Korea and the U.S. and strong economic data chipped away at investors' appetites for assets perceived as relatively safe.

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The yield on the 10-year U.S. Treasury note was recently at 2.268%, according to Tradeweb, compared with 2.217% Monday. Yields rise as bond prices fall.

Reports that North Korea had decided not to attack Guam, a turnabout after the country's leader ordered his military to examine a plan for a missile strike last week, drew investors out of government bonds on Tuesday.

Bonds also extended declines after data from the Commerce Department showed sales at retailers and restaurants jumped 0.6% in July -- the strongest sales growth all year. Economists surveyed by The Wall Street Journal had expected a 0.4% increase in sales.

Bond investors have been watching economic data closely in recent months for signs of a pickup in inflation, which has lagged behind the Federal Reserve's 2% annual target this year and made many skeptical that the central bank will rush to raise rates. Increased inflationary pressure would weaken demand for bonds since it chips away at the purchasing power of their fixed returns.

The morning's developments put Treasurys on track for their second consecutive day of declines. Some traders said an upcoming expected bond sale from Amazon.com could put additional pressure on prices in the afternoon.

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Later Tuesday, Amazon.com is expected to sell up to $16 billion of senior unsecured notes to help fund its planned acquisition of Whole Foods Market, according to Moody's Investors Service. Large corporate-debt sales can weigh on Treasurys as underwriters sell government debt to neutralize unwanted swings in interest rates and fund managers look to free up cash to absorb the new bonds.

The deal would be Amazon's fourth bond issuance, according to Moody's, and is expected to be the fourth-biggest bond sale of the year.

Sam Goldfarb contributed to this article.

Write to Akane Otani at akane.otani@wsj.com

(END) Dow Jones Newswires

August 15, 2017 10:16 ET (14:16 GMT)