TREASURIES-Yields fall after U.S. retail sales data disappoints

Tue May 13, 2014 2:51pm EDT

Related Topics

(Adds quotes, updates prices)
    * Prices rise, retail sales below expectations
    * Fed buys $1.03 bln bonds due 2039-2043
    * Market looks to inflation data due on Wed, Thurs

    By Karen Brettell
    NEW YORK, May 13 (Reuters) - U.S. Treasuries yields fell on
Tuesday after U.S. retail sales for April came in below
economists' forecasts, though growth expectations for the second
quarter were little changed.
    U.S. retail sales barely rose in April and a gauge of
consumer spending slipped, held back by declines in receipts at
furniture, electronic and appliance stores, restaurants and bars
and online retailers.
    The Commerce Department said on Tuesday retail sales edged
up 0.1 percent last month, less than economist forecasts of 0.4
percent, though the figure for March was revised upward to 1.5
percent. 
    While the market was disappointed, "the number is not as bad
as the headline," said Charles Comiskey, head of Treasuries
trading at Bank of Nova Scotia in New York, noting the rise from
March's 1.5 percent growth figure showed still-solid growth.
    Benchmark 10-year Treasuries have held in a tight range
since January, with yields oscillating between 2.57 percent and
2.82 percent as investors analyze data for signs of when the
Federal Reserve is likely to begin raising rates, which many
expect next year.
    Ten-year notes were last up 13/32 in price to
yield 2.62 percent, down from 2.66 percent late on Monday. The
notes have technical resistance at yields of around 2.60
percent.
    Thirty-year bonds gained 27/32 in price to yield
3.45 percent, down from 3.49 percent.
    "Retail sales was fairly weak, but the takeaway is that its
not going to lower second quarter GDP projections," said
Gennadiy Goldberg, interest rate strategist at TD Securities in
New York.
    "Data momentum has been improving but its choppy, and that
will keep the market fairly balanced going forward," Goldberg
said.    
    Recent data including the jobs report for April have shown
accelerating growth and increased investor hopes that weakness
from earlier in the year, which many blame on bad weather, is
ebbing.
    The next focus of attention will be the U.S. Producer Price
Index for April on Wednesday and the Consumer Price Index for
April on Thursday, which will be watched for signs that price
pressures are increasing.
    Low inflation is seen as complicating the Fed's ability to
raise interest rates unless there are signs that inflation will
rise back to the Fed's 2 percent target.
    The Fed bought $1.03 billion in bonds due between 2039 and
2043 on Tuesday as part of its ongoing purchase program. It will
purchase between $350 million and $600 million in notes due from
2024 to 2031 on Wednesday.

 (Editing by Bernadette Baum and Meredith Mazzilli)
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