US yields rise after strong retail sales
U.S. 10-year yield hits lowest since May 2023
August retail sales surprise to upside
U.S. 2/10 curve flattens to 5 bps
20-year note auction meets underwhelming demand
Updates as of 15:18 ET
By Matt Tracy
WASHINGTON, Sept 17 (Reuters) -U.S. Treasury 10-year yields rose from 16-month lows on Tuesday after news that retail sales in the world's largest economy increased unexpectedly last month, suggesting there is no urgency for the Federal Reserve to do a supersized rate cut of 50 basis points on Wednesday.
The Fed is widely expected to cut interest rates following a two-day meeting starting on Tuesday. The size of the rate reduction, however, is still very much up in the air.
Following the retail sales data, benchmark 10-year Treasury yields US10YT=RR fell to 3.599%, their lowest since May 2023, but subsequently rallied to their current 3.642%.
Benchmark yields hit the day's high following a 20-year note U20YT=RR auction that was met with underwhelming demand. The 2.51-to-one bid-to-cover ratio was the lowest since May, while primary dealers, who step in when buyers are scarce, bought 18.6% of $13 billion up for sale, which is the highest percentage since February and the second most in more than three years.
"This is an indication that institutional investors pulled back risk ahead of tomorrow's Fed meeting, questioning whether the bond market is ahead of itself," said Tom di Galoma, head of fixed income trading at Curvature Securities.
On the short end of the curve, the two-year yield US2YT=RR rose after hitting its weakest level in two years on Monday. It was last up 3.7 basis points to 3.592%.
U.S. retail sales surprisingly increased 0.1% in August, after an upwardly revised 1.1% surge in July. Economists polled by Reuters had forecast retail sales falling 0.2% last month.
After the report, U.S. rate futures priced in a 65% chance of a 50-bp easing on Wednesday, with a 35% probability of a 25-bps move, LSEG estimates showed. Futures traders have also factored in about 120 bps in cuts this year and 245 bps through September next year.
Industrial production in August similarly surprised to the upside, rebounding in August following a sharp decline in July. The NAHB Housing Market Index, a measure of homebuilder confidence, also beat market forecasts.
The yield on the 30-year bond US30YT=RR was last up 1.4 basis points at 3.951% after earlier dropping to its lowest since July 2023 at 3.898%.
"We're not seeing anything significant. I still think it's kind of a wait-and-see," said di Galoma. "I think people are really very unsure what the Fed's going to do here, so I don't think we're going to see very much happening until two o'clock tomorrow," he said.
Most economists expect the U.S. central bank to cut rates by 25 bps on Wednesday, according to a Reuters poll, arguing that the economy is not in distress to warrant the half-percentage-point reduction being anticipated by financial markets.
"We think the economy will remain solid, so we anticipate a measured easing cycle from the Fed, in contrast to the rapid cuts priced in by markets," said Michael Pearce, deputy chief U.S. economist at Oxford Economics.
The U.S. yield curve flattened after the data, with the yield spread between two- and 10-year notes narrowing to 5 bps US2US10=TWEB, compared with 6.5 bps late on Monday. The slight flattening of the curve suggested the market has modestly reduced rate cut expectations.
The latest initial jobless claims figures will come on Thursday after the Fed meeting, followed by services and manufacturing sector data on Monday.
The 10-year TIPS breakeven rate USBEI10Y=RR was last at 2.108%, indicating the market sees inflation averaging about 2.1% a year for the next decade.
Reporting by Matt Tracy; Editing by Gertrude Chavez-Dreyfuss and Jonathan Oatis
Ultime news
Disclaimer: le entità di XM Group forniscono servizi di sola esecuzione e accesso al nostro servizio di trading online, che permette all'individuo di visualizzare e/o utilizzare i contenuti disponibili sul sito o attraverso di esso; non ha il proposito di modificare o espandere le proprie funzioni, né le modifica o espande. L'accesso e l'utilizzo sono sempre soggetti a: (i) Termini e condizioni; (ii) Avvertenza sui rischi e (iii) Disclaimer completo. Tali contenuti sono perciò forniti a scopo puramente informativo. Nello specifico, ti preghiamo di considerare che i contenuti del nostro servizio di trading online non rappresentano un sollecito né un'offerta ad operare sui mercati finanziari. Il trading su qualsiasi mercato finanziario comporta un notevole livello di rischio per il tuo capitale.
Tutto il materiale pubblicato sul nostro servizio di trading online è unicamente a scopo educativo e informativo, e non contiene (e non dovrebbe essere considerato come contenente) consigli e raccomandazioni di carattere finanziario, di trading o fiscale, né informazioni riguardanti i nostri prezzi di trading, offerte o solleciti riguardanti transazioni che possano coinvolgere strumenti finanziari, oppure promozioni finanziarie da te non richieste.
Tutti i contenuti di terze parti, oltre ai contenuti offerti da XM, siano essi opinioni, news, ricerca, analisi, prezzi, altre informazioni o link a siti di terzi presenti su questo sito, sono forniti "così com'è", e vanno considerati come commenti generali sui mercati; per questo motivo, non possono essere visti come consigli di investimento. Dato che tutti i contenuti sono intesi come ricerche di investimento, devi considerare e accettare che non sono stati preparati né creati seguendo i requisiti normativi pensati per promuovere l'indipendenza delle ricerche di investimento; per questo motivo, questi contenuti devono essere considerati come comunicazioni di marketing in base alle leggi e normative vigenti. Assicurati di avere letto e compreso pienamente la nostra Notifica sulla ricerca di investimento non indipendente e la nostra Informativa sul rischio riguardante le informazioni sopra citate; tali documenti sono consultabili qui.
