(Recasts with U.S. retail sales, changes dateline, previous
LONDON)
By Karen Brettell
NEW YORK, July 16 (Reuters) - U.S. Treasury yields rose from
one-week lows on Friday after data showed that U.S. retail sales
unexpectedly rose in June, though doubts about the strength of
the economic recovery and dovish Federal Reserve policy were
seen as likely keep a cap on yields in the near-term.
Demand for goods remained strong even as spending is
shifting back to services, bolstering expectations that economic
growth accelerated in the second quarter.
Retail sales rebounded 0.6% last month, the Commerce
Department said on Friday. Data for May was revised down to show
sales falling 1.7% instead of declining 1.3% as previously
reported.
The data was "a little better," said Justin Lederer, an
interest rate strategist at Cantor Fitzgerald in New York.
However, yields are holding near last week's lows and "we're
sort of just sitting nowhere now."
Yields have dropped since Federal Reserve Chair Jerome
Powell on Wednesday and Thursday pledged "powerful support" to
complete the U.S. economic recovery, and indicated that he sees
no need to rush the withdrawal of support from the economy
because of a recent jump in inflation.
"I think most people expected higher yields at this point,
just given the economy's reopening ... but Powell's fairly dovish,
so it's really hard to. It doesn't feel like it's ready to
really go back to the year-to-date high yields," Lederer said.
Benchmark 10-year notes were last up three basis
points on the day at 1.331%. They are holding just above
five-month lows of 1.250% reached last week and are down from
1.776% in March.
The yield curve between two-year and 10-year notes
steepened on basis point to 108 basis points.
The yield curve has flattened in recent weeks as investors
prepare for the economic boom from business reopenings to fade,
and on concerns that eventual Fed tightening will dampen
inflation and slow growth.
That said, some analysts say that long-dated yields may be
too low relative to expected growth.
"The current level of Treasury yields imply a relatively
pessimistic growth outlook: the current level of yields would be
justified if we lowered our growth forecasts by nearly 3%-pts,
implying just 0.5% real growth over the next year," analysts at
JPMorgan said in a report late on Thursday.
"We think these concerns are overstated, but other recent
episodes indicate this gap is unlikely to close quickly," they
said.
July 16 Friday 9:08AM New York / 1308 GMT
Price Current Net
Yield % Change
(bps)
Three-month bills 0.045 0.0456 -0.002
Six-month bills 0.05 0.0507 0.000
Two-year note 99-197/256 0.2437 0.019
Three-year note 99-192/256 0.4593 0.026
Five-year note 100-70/256 0.8185 0.044
Seven-year note 100-246/256 1.1059 0.038
10-year note 102-180/256 1.3305 0.033
20-year bond 106-28/256 1.8793 0.035
30-year bond 109-136/256 1.9518 0.033
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps)
U.S. 2-year dollar swap 7.50 -0.25
spread
U.S. 3-year dollar swap 9.75 0.25
spread
U.S. 5-year dollar swap 7.25 -0.50
spread
U.S. 10-year dollar swap -1.75 -0.25
spread
U.S. 30-year dollar swap -29.75 -0.25
spread
(Editing by Nick Zieminski)
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