US Treasuries Tumble, Retail Sales Up

The yield on the benchmark 10-year US Treasury note hit its highest level since 2011 and the two-year yield hit its highest mark since 2008 after strong retail sales and manufacturing data.

The 10-year treasury note, which moves inversely to price, rose 9 basis points to 3.091% Tuesday, north of the 3.03% clinched in late April and the highest since 2011. The two-year yield hit a high of 2.589%, its highest level since August 11, 2008, CNBC reported.

The 10-year yield is especially important to investors given its role as a barometer for mortgage rates and other financial instruments. The yield on the 30-year treasury bond was also higher at 3.22%, its highest since April 26.

“There are a number of fundamental issues to watch and as long as economic growth remains steady, then the call for the fed to keep raising rates will stay loud,” wrote Kevin Giddis, head of fixed income capital markets at Raymond James.

“On top of that, the treasury will need to keep coming and coming with larger auctions throughout the year to pay for not only the ‘tax sweepstakes’, but to continue to keep up with the ambitious growth plan coming from the White House,” he added.

The New York Empire State Index, a gauge of manufacturing in the region, came in at 20.1 for May, much better than the 15 level estimated by economists.

Rise in yields knocked stocks, which opened lower Tuesday.

The commerce department said retail sales increased 0.3% in April, while March’s figure was revised up to a 0.8% gain. The spending gains were spread broadly across the retail industry, with big gains at furniture and clothing stores.

Consumer spending has rebounded in the past two months after a weak January and February, a trend that could accelerate growth in the April-June quarter.

“Consumption growth is on track for a big rebound in the second quarter, which should push overall GDP growth up to more than 3%,” said Michael Pearce, senior US economist at Capital Economics. That would represent an improvement from the January-March quarter when the economy expanded at a 2.3% annual rate.