Treasury yields declined Tuesday, after a flurry of weak economic reports were interpreted as an indication that the data-dependent Federal Reserve might have to delay plans to deliver its first rate hike in nearly a decade.
The yield on the 10-year treasury note fell 2.7 basis points to 2.403%, after recording its largest three-day increase in a month. Yields fall as bond prices rise.
The two-year yield declined 2.8 basis points to 0.641% and the yield on the 30-year treasury inched lower by 0.2 basis points to 3.205%, MarketWatch reported.
Sales at US retail stores fell 0.3% in June, showing that “despite the employment gains over the last couple of years and the relatively high savings rate, US consumers keep holding back in terms of spending,” said Mike Materasso, co-chair of Franklin Templeton’s Fixed Income Policy Committee.
This is particularly bad news because “other components [of the economy] such as industrial output, business investment, and the weak export sector are not carrying the load for domestic economic expansion,” Alan Schankel, managing director at Janney Capital Markets, said in a note.
A drop in small-business sentiment dropped sharply in June along with a weaker-than-expected import-prices report also fueled the buying momentum in the treasury market. The rally pushed prices higher and drove yields, which move inversely to prices, lower.
Tuesday’s price action in part refocused the treasury market’s attention on US fundamentals, but the unfolding situations in Greece and China, where the stock market crashed last week, will continue to weigh on the market, Materasso said.
