(Bloomberg) -- Treasuries halted their advance after data showing that American shoppers are proving more resilient than expected and factory output strengthening.
The dip in Treasuries caused the 10-year yield to climb as much as 1.4 basis points on the day to around 2.11%. The move followed a U.S. retail sales report that showed broad-based gains in May, as well as upward revisions for prior months, while U.S. industrial production numbers were also stronger than anticipated. The yield was little changed on the day at 2.09% as of 9:43 a.m. in New York.
The benchmark rate earlier fell as low as 2.06% amid a global scramble for safety that was spurred by rising geopolitical tensions in the Persian Gulf and increased concern about China's growth potential. Bets on Federal Reserve easing were also trimmed slightly, though traders continue to price in an interest-rate cut as likely by July, while German debt also pared earlier gains.
The latest data “will give the Fed a bit of breathing room to stay on hold a little longer,” said Sean Simko, head of fixed-income portfolio management at SEI Investments Co. “That's the knee-jerk reaction from Treasuries and why yields are moving higher. But there should still be a need for the Fed to cut rates sometime ahead given the overall slower growth and low inflation environment.”
Fed funds futures contracts indicate around 25 basis points of easing are priced in by the end of July, compared with 26 on Thursday. Around 68 basis points are priced in by the end of 2019.
To contact the reporters on this story: Benjamin Purvis in New York at bpurvis@bloomberg.net;Liz Capo McCormick in New York at emccormick7@bloomberg.net
To contact the editors responsible for this story: Paul Dobson at pdobson2@bloomberg.net, Alexandra Harris, Benjamin Purvis
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