BOND REPORT: Treasury Yields Climb After Stronger-than-expected Retail Sales Figure

By Sunny Oh Features Dow Jones Newswires

Treasury prices fell, pulling yields higher, on Thursday after strong retail sales figures highlighted the purchasing power of U.S. consumers and raised the outlook for near-term inflation and growth.

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What did Treasurys do?

The 10-year Treasury yield rose to 2.373%, from 2.353% on late Wednesday. The 2-year note yield ticked higher to 1.815%, from 1.786%. The 30-year bond yield was flat at 2.736%.

What's driving markets?

Traders dealt with a raft of solid economic data, adding to the pipeline of building inflationary pressures. This comes in the wake of a weak consumer-price index figure on Wednesday that drew bond-buying. Retail sales for November rose 0.8% (http://www.marketwatch.com/story/us-retail-sales-jump-08-in-november-as-holiday-season-gets-to-good-start-2017-12-14). Economists polled by MarketWatch had placed a median forecast of 0.4%. While, import prices in November rose 0.7%, but was flat once excluding for fuel prices.

Initial weekly jobless claims for the 7-day period ending Dec. 9 rose by 11,000 to 225,000 compared with an expected 235,000. Business inventories for October will come at 10 a.m. Eastern.

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What did strategists say?

"[The retail sales number] should be a net positive for Q4 real GDP estimates. That said, the Fed hiked yesterday despite the absence of inflation and the curve flattening trade continues to find support from that dynamic -- this remains the most identifiable trend," wrote Ian Lyngen, head of U.S. rates strategy for BMO Capital Markets, referring to the yield curve, a line tracing out bond maturities and yields.

A flattening yield curve is often interpreted as the market raising concerns about an economic slowdown because an inverted curve is seen as a precursor to a recession.

What else are on investors' radar?

The European Central Bank kept rates unchanged while ECB President Mario Draghi repeated his customary dovish remarks, saying an "ample degree" of stimulus was still needed to boost inflation. Market participants were expecting the central bank to shift its language from easing to tightening in anticipation of a conclusive end to its bond purchases in Sept. 2018. Holders of U.S. government paper watch European interest rates closely as they tend to move in lockstep, with some saying that low European yields have kept a lid on Treasury rates.

See: Watch here for ECB hints to the unwinding of QE: Live blog (http://blogs.marketwatch.com/thetell/2017/12/14/watch-here-for-ecb-hints-to-the-unwinding-of-qe-live-blog/)

What did other assets do?

European bonds took a cue from the U.S. trading action. The 10-year German bond yield rose 2 basis points to 0.334%. The 10-year French bond yield edged higher a basis point to 0.667%.

(END) Dow Jones Newswires

December 14, 2017 09:15 ET (14:15 GMT)