NEW YORK: US Treasury debt prices eased on Monday after data showing stronger than expected retail sales in September bolstered investors' appetite for risk, supporting stocks and undermining the safe-haven appeal of US government debt.
Losses were slight, however, and Treasury yields held within their recent ranges as investors saw low volatility going into the November US presidential election and before further clarity on the US "fiscal cliff" of expiring tax cuts and spending cuts that loom for early next year.
The government reported US retail sales rose by 1.1 percent last month, raising investor expectations that consumer spending is driving faster economic growth and that the Federal Reserve's stimulus efforts are supporting growth.
"The retail sales report was definitely stronger than expected and there were revisions to the previous month, and there is thought -- justified or not -- that the Fed's quantitative easing approach is beginning to work," said Mary Ann Hurley, vice president of fixed-income trading at D.A. Davidson & Co in Seattle.
"The equity markets are having a good day, and that is also hurting the Treasury market," Hurley said.
Benchmark 10-year Treasury notes traded 4/32 lower in price to yield 1.67 percent, up from 1.66 percent late Friday, while 30-year bonds traded 12/32 lower to yield 2.85 percent from 2.83 percent.
Benchmark yields have been holding in a range of 1.60 percent to 1.75 percent and are likely to stay there for the near future barring any economic data pointing to particularly strong, or particularly weak, economic growth, Hurley said.
Investors have been taking positions designed to benefit from low volatility on an expectation Treasuries will stay within their recent range for the coming months, said Fidelio Tata, head of US interest rate strategy at Societe Generale in New York.
Treasuries have also been largely range bound as Fed officials affirm that the US central bank will not change its loose monetary policy unless it is sure that the economic recovery has a firm footing.
New York Fed President William Dudley said on Monday that the central bank's policy stance will "evolve" only once "we became confident that the recovery was securely established."
"You're going to have to have months and months of economic growth before the Fed really comes into the picture," said Tom Tucci, head of Treasuries trading at CIBC in New York.
"In general I think the market is going to be wound up in a pretty tight range in front of the election," he added.
The bit of economic optimism from the retail sales report was tempered on Monday by a separate report showing manufacturing in New York state shrank for the third month in a row in October.
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