Bond Report: Treasury yields push higher after stronger-than-expected U.S. retail sales

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Treasury yields rose Friday following data showing a sharp increase in U.S. retail sales in September, ameliorating some concerns that consumer spending would plunge without further government support.

What are Treasurys doing?

The 10-year Treasury note BX:TMUBMUSD10Y yield rose 1.3 basis points to 0.744%, trimming its weekly drop to 3.2 basis points, while the 2-year note rate BX:TMUBMUSD02Y was up 0.4 basis point to 0.143%, leaving it with a one basis point increase over the week. The 30-year bond yield BX:TMUBMUSD30Y added 2.3 basis points to 1.528%, paring its weekly slide to 4.5 basis points.

What’s driving Treasurys?

Treasurys came under pressure after U.S. retail sales jumped 1.9% in September, above the MarketWatch-polled consensus of a 1.2% increase.

The elevated spending contrasts with worries that the U.S. economic recovery will fall apart if further government fiscal stimulus is not forthcoming, before the start of next year.

In other data, September industrial production fell 0.6% in September, the first decline after four straight months of increases. The University of Michigan’s preliminary reading of consumer sentiment index edged up to 81.2 this month from 80.4 in September.

European debt markets rallied as traders saw record new coronavirus cases reported in Europe. Comments from U.K. Prime Minister Boris Johnson that the country needs to prepare for a no-deal Brexit also sparked buying in safe-haven assets.

The 10-year German government bond yield TMBMKDE-10Y, -0.618% fell 0.9 basis point to negative 0.622%.

What did market participants’ say?

“Despite unemployment benefits expiring for millions of Americans, today’s retail sales figure shows us there is still some gas in the tank for the consumer,” said Charlie Ripley, a senior investment strategist for Allianz Investment Management.

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