Prices drop as retail sales improve
NEW YORK (Reuters) - Treasuries prices fell on Tuesday after better than expected retail sales in July boosted demand for riskier assets, and reduced demand for safe-haven bonds.
The data also added to the uncertainty over whether growth has slowed to the point where the Federal Reserve is likely to launch new stimulus when it meets in September.
U.S. retail sales rose in July for the first time in four months as demand rose broadly for everything from cars to electronics, a sign that consumers could drive faster economic growth in the third quarter.
"The Fed's not going to make a move based off of one economic data point but it certainly adds to the potential that the Fed might be content just staying put," said Jason Rogan, director of Treasuries trading at Guggenheim Partners in New York.
Markets have been buoyed in recent months by high expectations that both the U.S. Federal Reserve and the European Central Bank will announce new bond purchase programs when they each meet in September.
Investors will be watching for signs of further stimulus when Fed Chairman Ben Bernanke speaks at the central bank's annual conference in Jackson Hole at the end of the month.
Bernanke used his Jackson Hole speech in 2010 to hint at the Fed's second round of quantitative easing and may use the speech again to signal the central bank's plans for its September meeting.
Data released on Tuesday also showed that U.S. producer prices rose in July at the fastest pace in five months on higher costs for light trucks, pharmaceutical drugs and cigarettes, though falling energy prices point to muted inflation pressures.
Treasuries had earlier weakened after German and French data showed the euro zone's two leading economies withstood a contraction in the currency bloc during the second quarter.
Seasonally adjusted data showed German gross domestic product grew 0.3 percent in the second quarter on the back of solid exports and consumption and French GDP was static in the second quarter, confounding expectations of a contraction against the backdrop of a shrinking euro zone economy.
(Additional reporting by Emelia Sithole-Matarise, Editing by Theodore d'Afflisio)
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