Treasuries Move Back To The Upside On Disappointing Retail Sales Data

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Following the pullback seen in the latter part of the previous session, treasuries rebounded during trading on Friday.

Bond prices saw some volatility early in the session but ended the day firmly in positive territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.2 basis points to 1.097 percent.

The rebound by treasuries came following the release of disappointing retail sales data, with a report from the Commerce Department showing a continued decline in U.S. retail sales in the month of December.

The Commerce Department said retail sales fell by 0.7 percent in December after tumbling by a revised 1.4 percent in November.

Economists had expected retail sales to come in unchanged compared to the 1.1 percent slump originally reported for the previous month.

Excluding sales by motor vehicle and parts dealers, retail sales plunged by 1.4 percent in December after sliding by 1.3 percent in November.

Ex-auto sales were expected to edge down by 0.1 percent compared to the 0.9 percent decrease originally reported for the previous month.

“The further slump in retail sales in December confirms that the continued surge in coronavirus infections is now weighing heavily on the economy,” said Andrew Hunter, Senior U.S. Economist at Capital Economics. “Despite the building optimism over fiscal stimulus, the next few months are still likely to be difficult.”

The University of Michigan also released a report showing U.S. consumer sentiment has edged down by slightly more than expected in the month of January.

Meanwhile, the Federal Reserve released a separate report showing U.S. industrial production jumped by much more than expected in the month of December.

The Fed said industrial production surged up by 1.6 percent in December after climbing by an upwardly revised 0.5 percent in November.

Economists had expected production to rise by 0.4 percent, matching the increase originally reported for the previous month.

“The December production data underline that while new restrictions are holding back parts of the service sector again, the recovery in manufacturing continues largely unaffected,” said Michael Pearce, Senior U.S. Economist at Capital Economics.

Following the long weekend, next week’s trading may be impacted by reaction to reports on homebuilder confidence, housing starts, and existing home sales.


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