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U.S. Treasury yields fell slightly on Thursday after a decline in retail sales in the world’s second largest economy underlined the difficulties of recovering from the coronavirus crisis, while U.S. weekly unemployment data showed only marginal improvement.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, 0.620% fell 1.2 basis points to 0.618%, while the 2-year note rate TMUBMUSD02Y, 0.141% was virtually unchanged at 0.153%. The 30-year bond yield TMUBMUSD30Y, 1.315% slipped 1.9 basis points to 1.312%.
What’s driving Treasurys?
China’s economy rebounded by 3.2% in the second-quarter led by infrastructure investment, but investors noted retail sales had fallen by 3.9% over the same stretch, underlining how governments struggled to stimulate consumption.
Goldman Sachs analysts also noted the strong China growth numbers could reduce pressure on Beijing to carry out further stimulus measures.
The disappointing data led to bearish trading in global equity markets, boosting inflows into haven assets. U.S. stock futures were pointing to a negative start for Wall Street, while European and Asian shares fell.
In U.S. economic data, initial weekly jobless claims came in at 1.3 million. It was the 16th straight week in which initial claims totaled at least 1 million. Continuing claims, the total number of Americans claiming ongoing unemployment benefits in state programs, fell slightly to 17.3 million in the week ended July 4.
June retail sales jumped by 7.5% and the Philadelphia Federal Reserve’s manufacturing index for July rose to a reading of 21. The National Association of Home Builders will release its home builders’ index for July at 10 a.m.
Read: Here’s the good news and bad news about China GDP data
The European Central Bank, as expected, made no changes Thursday to interest rates or its asset-buying program, after having expanded the size of its pandemic emergency purchase program, or PEPP, in June. Investors have turned their attention to ECB President Christine Lagarde’s news conference.
As for the Fed, New York Fed President John Williams and Chicago Fed President Charles Evans will give remarks throughout the day.
What did market participants’ say?
“Financial markets were expecting solid Chinese economic data across the board and used the disappointing retail sales figure as the excuse to sell,” said Edward Moya, senior market analyst at OANDA.
