TREASURIES-Yields rise on retail sales, consumer confidence gains

BY Reuters | ECONOMIC | 10/16/20 03:18 PM EDT
    (Updates yields)
    By Karen Brettell
    NEW YORK, Oct 16 (Reuters) - U.S. Treasury yields edged
higher on Friday after data showed U.S. retail sales increased
more than expected in September and consumer confidence improved
in early October.
    Retail sales rose 1.9% last month as consumers bought motor
vehicles and clothing, dined out and splashed out on hobbies,
the Commerce Department said on Friday. That followed an
unrevised 0.6% increase in August. Economists polled by Reuters
had forecast retail sales would rise 0.7% in September.

    U.S. consumer sentiment also inched up to a seven-month high
in early October as rising expectations for a better economy in
the future outweighed a reversal in assessments of current
conditions.
    ?The economy is gradually improving, (but) the pace of that
recovery has been modest and is likely to continue to be
modest,? said Bill Merz, head of fixed income research at U.S.
Bank Wealth Management in Minneapolis. ?There are still a lot of
reasons why long-end Treasury yields shouldn?t rise
significantly for a sustained period in the near term.?
    Other data on Friday showed U.S. factory production fell
unexpectedly in September, suggesting manufacturing's recovery
was slowing heading into the fourth quarter.
    Benchmark 10-year note yields rose to 0.744%,
after moving as high as 0.757% on the retail sales data. The
yields have traded in a tight range from 0.50% to 0.80% since
April, with the exception of a brief spike to 0.96% in early
June.
    Treasury yields have held near historical lows as the
Federal Reserve pledges to keep interest rates zero-bound for
years and continues to purchase large amounts of Treasuries and
mortgage-backed debt.
    Inflation expectations also remain modest as the economy
continues to be weighed down by the effects of COVID-19.
    Investors are focused on whether lawmakers are likely to
pass new fiscal stimulus before the Nov. 3 presidential
election.
    U.S. President Donald Trump on Thursday said he is willing
to raise his offer of $1.8 trillion to get a deal with House of
Representatives Democratic Speaker Nancy Pelosi, which is likely
to raise concerns among his fellow Republicans in the Senate.

    Democrat challenger Joe Biden is expected to support a
larger stimulus bill if he wins next month?s election.

        October 16 Friday 3:00PM New York / 1900 GMT
                               Price
 US T BONDS DEC0               174-29/32    -0-11/32
 10YR TNotes DEC0              139-16/256   -0-16/25
                                            6
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.095        0.0963    -0.008
 Six-month bills               0.115        0.1167    0.000
 Two-year note                 99-246/256   0.1451    0.004
 Three-year note               99-212/256   0.1827    0.006
 Five-year note                99-170/256   0.3185    0.005
 Seven-year note               98-250/256   0.5252    0.008
 10-year note                  98-224/256   0.744     0.010
 20-year bond                  97-4/256     1.2962    0.014
 30-year bond                  96-84/256    1.5288    0.020

   DOLLAR SWAP SPREADS
                               Last (bps)   Net
                                            Change
                                            (bps)
 U.S. 2-year dollar swap         8.50        -0.50
 spread
 U.S. 3-year dollar swap         8.00        -0.50
 spread
 U.S. 5-year dollar swap         7.50        -0.25
 spread
 U.S. 10-year dollar swap        2.50        -0.75
 spread
 U.S. 30-year dollar swap      -35.75        -1.50
 spread




 (Reporting by Karen Brettell, Editing by Andrea Ricci, Chris
Reese and Sonya Hepinstall)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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