US Treasuries prices rose on Friday, with yields hitting their lowest in a week, as unexpectedly weak US retail sales and producer prices data reinforced the view of modest economic growth and tame inflation. The data also supported the notion the Federal Reserve would raise interest rates gradually if it decides to tighten monetary policy.
"We had a weak set of data and people realize the Fed's rate-hike plan will be slow and data-dependent," said Com Crocker, managing director of government and agency securities trading at Mesirow Financial in New York. Treasury futures rose in light volume in the last hour of trading following news of attacks in Paris that left at least 40 dead, and a hostage situation, according to French media reports.
The 10-year Treasury future rose in price to 126-21/32 at 5 pm ET (2200 GMT) from 126-18/32 at 4:15 pm ET. Mark Grant, managing director and fixed-income strategist at Hilltop Securities, said he expected Treasury prices to rise on Monday and equities to decline. "I think the fear factor is going to cause flights to quality," he said. The government said US retail sales edged up 0.1 percent last month, falling short of the 0.3 percent increase forecast by analysts polled by Reuters, while producer prices fell 0.4 percent last month, compared with a 0.2 percent rise projected by economists polled by Reuters.
These disappointing figures were mitigated by a University of Michigan report that showed a stronger-than-expected improvement in US consumer sentiment in early November. Bids for Treasuries were further stoked by losses on Wall Street, with the Standard & Poor's 500 index losing 0.9 percent, and by less bond supply, traders and analysts said. Benchmark 10-year Treasuries notes were last up 13/32 in price with a yield of 2.273 percent, down 5 basis points from late on Thursday.
The 10-year yield has fallen 6 basis points on the week, snapping three straight weekly increases. The 30-year bond was up 20/32 for a yield of 3.053 percent, down 3 basis points on Friday and about 4 basis points for the week. The US Treasury Department this week sold $64 billion of debt for its quarterly refunding to mostly solid investor demand.
Companies have raised $29 billion in the investment-grade credit market this week, according to IFR, a unit of Thomson Reuters. "We had supply, both government and corporate, this week, which has been well received. There is still a lot of cash on sidelines to put to work," Crocker said. While Friday's retail and producer price reports dialed down some expectations of a December rate hike, a number of top Fed officials including Cleveland Fed President Loretta Mester on Friday have signaled such a move is likely barring a sharp deterioration in the economy and financial markets. "You have Fed speakers who basically said a December rate hike is pretty set," said Robert Tipp, chief investment strategist at Prudential Fixed Income in Newark, New Jersey.