US Treasury prices tumble

US government bond prices fell on Wednesday after robust retail sales data eased concerns over sluggish economic growth, while fresh supply of 10-year Treasuries weighed on the market after an $8 billion auction.
Treasury yields hit their highest levels since late November - with five-, 10- and 30-year yields rising the most in a month - while the interest rate futures market indicated less probability of the Federal Reserve easing monetary policy next year.
Retail sales data set the tone when the government reported a 1.0 percent gain in November, which includes the start of the critical holiday shopping season. Last month's rebound after an October dip surpassed the median forecast of a 0.2 percent increase among economists surveyed by Reuters.
The data came a day after the Federal Reserve left interest rates on hold for the fourth straight meeting, though some investors expecting rate cuts next year had drawn encouragement from its references to a "substantial" cooling in the housing market and "mixed" economic indicators. "Definitely the retail sales number is very good," said Adam Brown, co-head of US Treasury trading at Barclays Capital.
"Yields were too low. If you believe the Fed is on hold, which is what we believe, and this market is already pricing in cuts, this move made sense," he said. Benchmark 10-year notes tumbled 20/32 in price to yield 4.57 percent, up from 4.49 percent late on Tuesday. The yield rose as far as 4.59 percent.
Two-year notes were trading down 5/32 in price to yield 4.71 percent. Earlier, the yield hit 4.72 percent. Five-year notes were down 12/32 in price to yield 4.54 percent.
The 30-year long bond was down 35/32, pushing the yield up to 4.68 percent. The yield hit a session high of 4.70 percent. The results of the government's $8 billion reopening of a previous 10-year note provided further reason to sell bonds.
The bid-to-cover measure of demand in the Treasury auction was 2.48, below the 2.91 in the September reopening. The high yield of 4.58 percent was above the when-issue yield of 4.57 percent. Indirect bids, which measure demand from foreign central banks and private institutional investors, were also fairly low. In response to the retail sales data, some economists boosted their forecasts on consumer spending and gross domestic product growth in the fourth quarter.
"People are liquidating some long positions," said James Caron, head of US interest rate strategy at Morgan Stanley in New York. "You can't think of a rate cut anytime soon."