Treasuries Close Higher But Well Off Best Levels Of The Day

(RTTNews) - After moving notably higher in early trading on Tuesday, treasuries gave back some ground as the day progressed but still closed in positive territory.

While bond prices pulled back well off their best levels, they still managed to end the day moderately higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.5 basis points to 1.904 percent.

The early strength among treasuries was largely in reaction to a report from the Commerce Department showing a smaller than expected rebound in U.S. retail sales in the month of March.

While the report said retail sales climbed by 0.9 percent in March following a revised 0.5 percent decrease in February, economists had been expecting sales to surge up by 1.1 percent.

Excluding a jump in sales by motor vehicle and parts dealers, retail sales rose by a more modest 0.4 percent in March. Ex-auto sales had been expected to rise by 0.6 percent.

Chris Low, chief economist at FTN Financial, said, "Normally, a 0.9% retail sales increase in a month can be described as strong, but not this time, because the rise failed to reverse even half of the prior three months' weakness."

Meanwhile, the Labor Department released a separate report showing that producer prices rose for the first time in five months in March.

The Labor Department said its producer price index for final demand rose by 0.2 percent in March after falling by 0.5 percent in February. The increase in prices matched economist estimates.

Core producer prices, which exclude food and energy prices, also rose by 0.2 percent in March following a 0.5 percent drop in the previous month. Economists had expected core prices to tick up by 0.1 percent.

Trading on Wednesday may be impacted by a number of different catalysts, including the European Central Bank's monetary policy meeting.

U.S. economic data may also attract some attention, with traders likely to keep an eye on reports on industrial production, homebuilder confidence and New York manufacturing as well as the Federal Reserve's Beige Book.