After ending the previous session roughly flat, treasuries saw substantial weakness over the course of the trading day on Tuesday.
Bond prices came under pressure in early trading and saw further downside as the day progressed. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 10.1 basis points to 2.281 percent.
With the sharp increase on the day, the ten-year yield ended the session at its highest closing level in almost two months.
The sell-off by treasuries came as traders reacted to a slew of U.S. economic data that reduced the appeal of safe havens such as bonds.
Stocks moved sharply higher on the day as the weaker than expected data provided support for the view that the Federal Reserve will leave interest rates unchanged later this week.
The Commerce Department released a report early this morning showing that U.S. retail sales rose slightly less than expected in August.
The report said retail sales edged up by 0.2 percent in August following an upwardly revised 0.7 percent increase in July. Economists had expected retail sales to rise by 0.3 percent.
Additionally, the New York Federal Reserve said its index of regional manufacturing activity continued to point to a notable contraction in the month of September.
The Fed also released a report showing a bigger than expected decrease in industrial production in the month of August.
The report said industrial production fell by 0.4 percent in August following an upwardly revised 0.9 percent increase in July. Production had been expected to dip by 0.2 percent.
Rob Carnell, chief international economist at ING, said, “All in all, weak, disappointing, and taken together with other data earlier today – retail sales and Empire manufacturing – nudges the argument in the direction of the FOMC doves.”
“With only CPI left to come before the September 17th meeting, and that likely to be on the low side, the data dependent FOMC might find the pendulum swinging a little more to the ‘no hike’ side,” he added.
The Fed is scheduled to begin its two-day monetary policy meeting on Wednesday, with the announcement of its decision due Thursday afternoon.
Trading on Wednesday may be impacted by the Labor Department’s report on consumer price inflation as well as the National Association of Home Builders’ report on homebuilder confidence.
The material has been provided by InstaForex Company – www.instaforex.com