Treasuries Close Sharply Lower On Upbeat Retail Sales Data

(RTTNews) - Treasuries moved sharply lower over the course of the trading day on Tuesday following the release of relatively upbeat retail sales data.

After showing a steep drop in early trading, bond prices saw some further downside as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 11 basis points to 2.715 percent.

With the substantial increase on the day, the ten-year yield offset its recent pullback, ending the day close to the nearly two-year closing high set earlier this month.

The weakness among treasuries came following the release of a report from the Commerce Department showing the fourth consecutive monthly increase in retail sales in July.

The report said retail sales edged up by 0.2 percent in July following an upwardly revised 0.6 percent increase in June.

While the increase in overall sales fell short of economist estimates for 0.3 percent growth, sales rose by a little more than expected when excluding auto sales.

Excluding a 1.0 percent drop in auto sales, retail sales rose by 0.5 percent in July compared to a 0.1 percent increase in June. The increase exceeded economist estimates for 0.4 percent growth.

The relatively upbeat retail sales data added to recent speculation that the Federal Reserve will begin scaling back its asset purchase program at its September meeting.

Peter Boockvar, chief market analyst at the Lindsey Group, said, "Bottom line, after a 1.8% rise in Q1 and 2.3% gain in Q2, personal consumption within GDP is expected to be up 2.2% in Q3 and today's retail sales figure (while only one month) likely confirms that for now."

"It also therefore doesn't move the needle for what the Fed plans on doing in September anyway which is likely taper," he added.

Meanwhile, bond traders largely shrugged off comments from Atlanta Fed President Dennis Lockhart, who stressed that the decision to reduce asset purchases will be data-dependent but argued that the recent data does not present a clear picture.

Trading on Wednesday could be impacted by the Labor Department's report on producer prices as well as remarks by St. Louis Fed President James Bullard.