Treasury yields rebound from 2 month lows on mixed economic data

NEW YORK, Nov 15 – US Treasury yields rebounded from two-month lows on Wednesday despite signs of slowing inflation after a revision of retail sales data showed strong gains in September.

Overall, retail sales dipped 0.1% last month, slightly less than the 0.3% economists polled by Reuters expected, according to the Commerce Department. Data for September was revised higher to show sales increasing 0.9% instead of the previously reported 0.7% rise.

At the same time, the headline reading of the Producer Price Index was down 0.5% month on month, well below the estimate of a 0.1% rise, following Tuesday’s reading of lower consumer prices. Producer prices rose 0.5% in September.

“It’s this Jekyll and Hyde bond market right now where one moment you’re applauding good inflation data and the next you’re worried about strong economic data,” said Lawrence Gillum, chief fixed income strategist at LPL Financial. “As long as the Fed has the potential to either raise rates again or prolong interest rate cuts you will see these sporadic movements in the bond market.”

The yield on 10-year Treasury notes was up 9 basis points to 4.531%. The yield on the 30-year Treasury bond was up 6 basis points to 4.681%.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was up 10.3 basis points at 4.920%.

Treasury yields, which move in the opposite direction of prices, plummeted on Tuesday following softer than expected consumer inflation data, pushing the 10-year Treasury yield down by its largest daily amount since March.

The mixed economic data Wednesday will likely stall any further large moves in yields, said Ian Lyngen, head of US rates strategy at BMO Capital Markets Fixed Income Strategy Team.

“We expect the market will drift sideways from here and a downward bias in yields will emerge as the weekend approaches,” he said.

November 15 Wednesday 3:35PM New York / 2035 GMT

(Reporting by David Randall; Editing by Nick Zieminski and Jonathan Oatis)