US Treasuries prices fell on Tuesday, pushing benchmark yields up from two-month lows, after surprisingly strong August retail sales raised the possibility of a more robust economic recovery than expected. August retail sales jumped 2.7 percent, the sharpest rise in 3-1/2 years, indicating that consumer spending might make a bigger-than-anticipated contribution to the economy's recovery from the worst recession in decades.
The data came exactly one year after the spectacular collapse of Lehman Brothers investment bank pushed the United States from a mild recession into a deep downturn and sent shock waves throughout the global financial system. "Expectations were high for the retail sales number, but the number reported exceeded even those expectations," said Josh Stiles, senior bond strategist at IDEAglobal in New York. "Even excluding autos and gas, sales rose 0.6 percent."
Other data, like the September Empire State regional manufacturing report, also exceeded expectations, Stiles said, and core producer prices rose 0.2 percent August, hinting that demand was firming. The firm economic data lifted stocks and sent bond prices lower. The benchmark 10-year Treasury note was down 9/32 in price in late trade, its yield having risen to 3.46 percent from 3.42 percent at Monday's close. Stiles said some selling was technical.
Yields are now well above last Friday's two-month low of 3.27 percent, hit at the end of a five-week rally. On the day, though, bond prices - which move opposite to yields - were well off their lows. The sell-off encouraged people to "put some money to work," said Thomas di Galoma, head of fixed income rates trading at Guggenheim Capital Markets. In late trade, 30-year long bonds were down 19/32, their yields rising to 4.26 percent from 4.23 percent at Monday's close.
Traders attributed the bond market's partial recovery from the day's lows to persistent skepticism about the strength of any US economic rebound. Analysts said they don't know how well the economy could do without government efforts to stimulate growth, such as the recent "cash-for-clunkers" program meant to boost car sales.