July 14, 2015 / 6:38 PM / 2 years ago

TREASURIES-Yields drop on weak retail sales data

(Adds quote, details on Greece, updates prices)
    * Retail sales drop sparks bond buying
    * Greek uncertainty adds to bond bid
    * Yellen testimony on Wednesday in focus

    By Karen Brettell
    NEW YORK, July 14 (Reuters) - U.S. Treasury yields fell on
Tuesday after data showed U.S. retail sales unexpectedly fell in
June, adding to speculation that tepid economic data may lead
the Federal Reserve to wait longer before raising interest
rates.
    The Commerce Department said retail sales slipped 0.3
percent last month, the weakest reading since February. May's
retail sales were revised down to show them rising 1.0 percent
instead of the previously reported 1.2 percent jump.
 
    The data will increase focus on Fed chair Janet Yellen's
Humphrey-Hawkins testimony to Congress on Wednesday and
Thursday. Yields had gained after Yellen gave a hawkish speech
on Friday and said she expects a rate hike at some point this
year. 
    "It certainly doesn't help the cause. Everyone seemed to get
a bit more bearish after Yellen made her comments on Friday,
people are anticipating kind of the same tone going into
tomorrow," said Tom Tucci, head of Treasuries trading at CIBC in
New York.
    Benchmark 10-year notes were last up 10/32 in
price to yield 2.41 percent, down from around 2.43 percent
before the data was released. The yields have held in a range
between 2.18 percent and 2.50 percent since the beginning of
June.
    The yield curve also steepened as long bonds underperformed,
hurt by bearish technical indicators and heavy corporate supply.
The gap between five-year note and 30-year bond yields
 steepened to 153 basis points, from 152 basis
points late on Monday.
    Treasury prices also gained on uncertainty in Greece as a
secret International Monetary Fund study showed Greece needs far
more debt relief than European governments have been willing to
contemplate so far.
    The IMF's stark warning on Athens' debt was leaked as Greek
Prime Minister Alexis Tsipras struggled to persuade deeply
unhappy leftist lawmakers to vote for a package of austerity
measures and liberal economic reforms to secure a new bailout.
 
    "There is worrying about Greece not doing what it is
supposed to do, or somebody vetoing it, this could go on and on
and on," said Tom di Galoma, head of rates and credit trading at
ED&F Man Capital Markets in New York.
    U.S. producer price data on Wednesday and consumer price
data on Friday will also be in focus for signs on whether
inflation is rising to Fed's targets.
    

 (Editing by Meredith Mazzilli and Andrew Hay)

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