Following the sharp pullback seen over the past few sessions, treasuries regained some ground during trading on Tuesday.
Bond prices moved to the upside in early trading and managed to remain in positive territory throughout the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.1 basis points to 2.399 percent.
The rebound by treasuries came following the release of a report from the Commerce Department showing an unexpected drop in retail sales in the month of June.
The report said retail sales fell by 0.3 percent in June compared to economist estimates for an increase of about 0.3 percent.
The unexpected drop in sales came following a 1.0 increase in May, which was downwardly revised compared to the 1.2 percent jump originally reported.
James Knightley, an economist at ING Bank, said, “It is possible that the early Memorial Day holiday has boosted sales in May at the expense of June.”
Subsequently, Knightley suggested looking at the three-month annualized rate, which rose to 6.0 percent in June from 5.3 percent in May.
“This shows that the situation isn’t that bad and with employment and pay rising and confidence at high levels we remain optimistic on the prospects for consumer spending,” he added.
The decrease in retail sales was partly due to a sharp pullback in sales by motor vehicle and parts dealers, which tumbled by 1.1 percent in June after surging up by 1.8 percent in May.
Excluding the steep drop in auto sales, however, retail sales still edged down by 0.1 percent in June compared to a 0.8 percent increase in May. Ex-auto sales had been expected to climb by 0.5 percent.
A separate Commerce Department said business inventories rose in line with estimates in May, while the Labor Department also released a report showing an unexpected drop in import prices in June.
U.S. economic data may continue to attract attention on Wednesday, with traders likely to keep an eye on reports on producer prices, industrial production, and New York manufacturing activity.
Federal Reserve Chair Janet Yellen is also scheduled to testify before the House Financial Services Committee, potentially providing additional insight regarding the outlook for interest rates.
The material has been provided by InstaForex Company – www.instaforex.com