Bond Report: Yields extend rise after strong U.S. retail sales data


Bond yields rose on Friday, extending the sell-off in fixed income after another round of solid U.S. economic data.

What’s happening

  • The yield on the 2-year Treasury BX:TMUBMUSD02Y was 5.05%, up 3.8 basis points. Yields move in the opposite direction to prices.
  • The yield on the 10-year Treasury BX:TMUBMUSD10Y was 4.32%, up 2.2 basis points.
  • The yield on the 30-year Treasury BX:TMUBMUSD30Y was 4.4%, up 1.8 basis points.

What’s driving markets

Thursday’s reports showed a stronger-than-expected rise in retail sales, albeit one driven by gasoline sales, alongside producer price data that matched expectations. Economists at Mizuho say it’s looking like inflation-adjusted consumption is running at a 3.5% annualized rate, making it likely that third-quarter GDP will land above 2.5%.

The economics calendar for Friday includes the Empire State manufacturing index, industrial production as well as the preliminary release of the University of Michigan’s consumer sentiment index.

There’s also the symbolism of the United Auto Workers’ strike, which has started at a plant of each of three major U.S. auto companies, which could lead to concern about wage growth and its impact on inflation.

Next week’s Federal Open Market Committee decision is looming. While there’s virtually no chance of a rate hike, the central bank will be updating its economic and rate forecasts.

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