Treasury prices rise after weak retail-sales data

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By Victor Reklaitis, MarketWatch

NEW YORK (MarketWatch) — Treasury prices moved higher on Monday after a weaker-than-expected retail-sales report spurred safety bids.

The 10-year Treasury note /quotes/zigman/4868283/delayed 10_YEAR -0.66% yield, which moves inversely to price, fell 3 basis point to 2.561%. It had shown a gain before the June retail-sales report, rising as high as 2.64%, according to FactSet data.

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The 30-year bond /quotes/zigman/4868063/delayed 30_YEAR +0.03% yield dipped 1 basis point to 3.617%, while the 5-year note /quotes/zigman/4868109/delayed 5_YEAR -2.17% yield dropped 3 basis points to 1.390%.

“Retail sales caught everybody by surprise,” said Thomas di Galoma, senior vice president of fixed-income-rates trading at ED&F Man Capital Markets.

The report indicated weakness in several key areas, signaling the nation’s growth rate likely eased as the second quarter wrapped up.

“I do think the second half is going to be a tougher half of the year,” di Galoma told MarketWatch. He added that weaker economic data as 2013 progresses might hold back the Federal Reserve from starting to taper its bond-buying program. Many market watchers have been expecting a September beginning in tapering.

“Maybe somehow that could be put on the back burner,” di Galoma said.

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Economic data lift stock futures

U.S. stock futures gained ground as an upbeat economic report out of China helped put the market on track to extend its run to fresh highs.

June retail sales showed seasonally adjusted growth of 0.4%, with a big lift coming from strong demand for autos. Economists polled by MarketWatch had predicted a 0.9% increase.

“Although the headline gain in retail sales was a disappointing rise of just 0.4%, once again consumers forked over lots of cash to buy new cars and trucks in July,” said Andrew Wilkinson, chief economic strategist at Miller Tabak, in emailed comments.

Investors on Monday also were digesting better-than-expected readings for the Empire State manufacturing survey and for business inventories.

U.S. stocks were slightly higher, helped by better-than-expected earnings from Citigroup Inc. /quotes/zigman/5065548/quotes/nls/c C +2.07% and Chinese economic growth data that matched expectations.

On Friday, Treasury prices swung lower on hawkish Fed comments. The 10-year yield rose 2 basis points to 2.598%, but nonetheless finished down for the week, losing 11.5 basis points.

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