U.S. Treasuries trickled lower today after the latest
retail sales report showed a small increase in May sales and an upwardly revised number for April.
Lately, the two-year note lost 1/32 to 100 10/32, with a yield, which moves inversely to the price, of 4.802%. The 10-year benchmark note slipped 3/32 to 98, raising the yield to 5.266%, and the 30-year Treasury bond dipped 2/32 to 95 30/32, moving the yield higher to 5.657%.
Debt strategists said Treasuries moved lower today because the retail sales report, though weaker than expected, still presented evidence of a slight uptick in consumer spending. "If you'd seen a negative number, you would have seen the bond market take off," said Michael Maurer, Treasury strategist at
A.G. Edwards & Sons
, adding that the retail sales report was a "slight positive" for the economy.
According to the latest data released by the
, retail sales in May rose 0.1%, compared with the 0.2% increase economists expected. Excluding auto sales, retail sales rose 0.3% for the month. April's retail sales were revised up to reflect an increase of 1.4%. The preliminary report indicated that retail sales for April rose 1.1%.
"I think they were pretty good. They revised the prior month April up and basically for the level of sales to have held up, that was pretty good," said Frazier Evans, senior economist at
Colonial Investment Services
. "Basically, what's holding the economy together is the consumer. Everything else is kind of soggy on the corporate side." That said, the economist cautioned against reading too much into the number for May, which is based on a limited sample.
Beige Book, a compilation of findings used to gauge the health of the economy, showed that "economic activity was little changed or decelerating in April and May," according to
The bond market continues to expect Alan Greenspan and his crew of central bankers to continue their policy of easing. According to the July
fed funds futures contract, the bond market continues to price in a 100% chance of a 25 basis point rate cut at the Fed's next meeting on June 26-27.
As for the rest of the week, market observers said the upcoming
producer price index and
consumer price index will guide Treasury trading. Larry Berman, fixed-income strategist at
CIBC World Markets
believes the market is expecting a weaker CPI index.