NEW YORK: US Treasury debt prices were slightly higher on Thursday after lackluster U.S. retail sales and jobless claims data somewhat dimmed the generally positive outlook for the world's largest economy.
Thursday's modest gains in Treasuries reversed earlier losses ahead of a key $13-billion U.S. 30-year bond auction, coming after two relatively weak sales earlier this week in the three-year and 10-year sectors.
Data showed on Thursday that U.S. retail sales rose less than expected in May and first-time applications for unemployment benefits increased last week. These numbers though were not big shockers and are less likely to alter the timing of the Federal Reserve's first interest rate increase after the end of its asset-buying plan.
The retail sales figure was the last major economic data reported before next week's two-day monetary policy meeting of the U.S. central bank.
"The numbers won't change the outlook for the Fed meeting next week. It's not a big enough of a miss," said Stanley Sun, interest rate strategist, at Nomura Securities in New York.
"It's still kind of a muddle-through scenario for the U.S. economy, which in general is still constructive for Treasuries. Yields are rich, but as long as we don't see the data bouncing back, there's no reason to sell."
In mid-morning trading, benchmark U.S. 10-year notes were up 2/32 in price to yield 2.633 percent, from 2.641 percent late on Wednesday. Yields hit session lows of 2.624 percent after the U.S. data.
U.S. 30-year bonds were up 1/32 in price to yield of 3.466 percent, from 3.468 percent late Wednesday.
With U.S. data out of the way, market participants are now focused on the 30-year bond re-opening. The auction results will be released at 1 p.m. (1700 GMT).
Nomura's Sun said he still expects strong demand for 30-year bonds despite tails in this week's U.S. three-year and 10-year notes. "We think it should require more concession on the curve, which we're already seeing. Essentially we're already seeing a steepening on the long end."
However, CRT in its morning note suggested that there's a pretty good chance that the yield on the 30-year bond sale could come higher than market expectations.
"Since the re-introduction of the long bond in 2006, when both 3s and 10s tailed in a given week, there is a 54 percent probability of a tail in 30s," CRT said.
Comments
Comments are closed.