Treasuries Close Modestly Lower But Well Off Worst Levels

(RTTNews) - After coming under pressure in early trading, treasuries regained some ground as the day progressed but still closed modestly lower.

Bond prices finished the day in the red after closing roughly flat for three straight sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 1.9 basis points to 2.380 percent.

The early weakness among treasuries came following the release of a report from the Commerce Department showing slightly weaker than expected retail sales growth in the month of December.

The Commerce Department said retail sales climbed by 0.6 percent in December after edging up by a revised 0.2 percent in November. Economists had expected retail sales to increase by 0.7 percent.

Excluding auto sales, retail sales inched up by 0.2 percent in December after rising by 0.3 percent in November. Ex-auto sales had been expected to climb by 0.5 percent.

Closely watched core retail sales, which exclude autos, gasoline, building materials and food service, rose by 0.2 percent in December after coming in unchanged in November. Economists had expected a 0.4 percent increase.

While the pace of growth fell short of estimates, Rob Carnell, Chief International Economist at ING, said, "Sales were not particularly weak in an absolute sense, with both main measures showing gains over the previous month."

"There is therefore no good reason why this data should deter the Fed from hiking rates again at their March meeting if they want to do so, which we think they do," he added.

A separate report from the Labor Department showed that producer price growth came in line with economist estimates in December.

The Labor Department said its producer price index for final demand rose by 0.3 percent in December after climbing by 0.4 percent in November.

Excluding food and energy prices, core producer prices edged up by 0.2 percent in December after rising by 0.4 percent in November. Core prices had been expected to inch up by 0.1 percent.

Meanwhile, the University of Michigan released a report showing that its consumer sentiment index unexpectedly edged down to 98.1 in January from 98.2 in December.

Reports on industrial production, consumer prices, housing starts, and regional manufacturing activity are likely to attract attention next week.

Additionally, the Federal Reserve is scheduled to release its Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts, which may shed some light on the outlook for interest rates.